Explanation

Factors affecting bid-offer spreads in foreign exchange markets:

• Retail vs interbank transactions (Option A): Retail transactions typically have wider spreads than interbank transactions because:

  • Retail clients trade smaller amounts
  • Dealers face higher operational costs per transaction
  • Less competition at the retail level
  • Interbank market has higher liquidity and more competition

• Winning repeat business (Option B): When dealers want to win repeat business, they typically offer tighter spreads to be competitive

• Market certainty (Option C): Greater certainty about market factors typically leads to narrower spreads as risk decreases

Therefore, bid-offer spreads are widest for retail transactions compared to interbank transactions.