31:
137:—brokerage fees and bid–ask spreads. Under competitive conditions, the bid–ask spread measures the cost of making transactions without delay. The difference in price paid by an urgent buyer and received by an urgent seller is the liquidity cost. Since brokerage commissions do not vary with the time taken to complete a transaction, differences in bid–ask spread indicate differences in the liquidity cost.
294:. The effective spread is more difficult to measure than the quoted spread, since one needs to match trades with quotes and account for reporting delays (at least pre-electronic trading). Moreover, this definition embeds the assumption that trades above the midpoint are buys and trades below the midpoint are sales.
447:, while other metals may have wider bid-ask spreads due to lower trading volumes, less liquidity, or large fluctuations in supply and demand. For example, rare metals like platinum, palladium, and rhodium have lower trading volumes compared to gold or silver, which can result in larger bid-ask spreads.
434:
If the USD/JPY currency pair is currently trading at 101.89/101.92, that is another way of saying that the bid for the USD/JPY is 101.89 and the offer is 101.92. This means that currently, holders of USD can sell US$ 1 for 101.89 JPY and investors who wish to buy dollars can do so at a cost of
302:
Quoted and effective spreads represent costs incurred by traders. This cost includes both a cost of asymmetric information, that is, a loss to traders that are more informed, as well as a cost of immediacy, that is, a cost for having a trade being executed by an intermediary. The realized spread
150:
The simplest type of bid-ask spread is the quoted spread. This spread is taken directly from quotes, that is, posted prices. Using quotes, this spread is the difference between the lowest asking price (the lowest price at which someone will sell) and the highest bid price (the highest price at
218:
Quoted spreads often over-state the spreads finally paid by traders, due to "price improvement", that is, a dealer offering a better price than the quotes, also known as "trading inside the spread". Effective spreads account for this issue by using trade prices, and are typically defined as:
122:. For a round trip (a purchase and sale together) the liquidity demander pays the spread and the liquidity supplier earns the spread. All limit orders outstanding at a given time (i.e. limit orders that have not been executed) are together called the Limit Order Book. In some markets such as
412:
292:
208:
414:
where the subscript k represents the kth trade. The intuition for why this spread measures the cost of immediacy is that, after each trade, the dealer adjusts quotes to reflect the information in the trade (and inventory effects).
426:
If the current bid price for the EUR/USD currency pair is 1.5760 and the current offer price is 1.5763, this means that currently you can sell the EUR/USD at 1.5760 and buy at 1.5763. The difference between those prices (3
306:
34:
Order book depth chart on a currency exchange. The x-axis is the unit price, the y-axis is cumulative order depth. Bids (buyers) on the left, asks (sellers) on the right, with a bid–ask spread in the middle.
130:, there are no designated liquidity suppliers, and liquidity is supplied by other traders. On these exchanges, and even on NASDAQ, institutions and individuals can supply liquidity by placing limit orders.
222:
133:
The bid–ask spread is an accepted measure of liquidity costs in exchange traded securities and commodities. On any standardized exchange, two elements comprise almost all of the
154:
745:
151:
which someone will buy). This spread is often expressed as a percent of the midpoint, that is, the average between the lowest ask and highest bid:
407:{\displaystyle {\text{Realized Spread}}_{k}=2\times {\frac {|{\hbox{Midpoint}}_{k+1}-{\hbox{Traded Price}}_{k}|}{{\hbox{Midpoint}}_{k}}}\times 100}
648:
Huang, Roger D.; Stoll, Hans R. (July 1996). "Dealer versus auction markets: A paired comparison of execution costs on NASDAQ and the NYSE".
90:
in some auction scenario. The size of the bid–ask spread in a security is one measure of the liquidity of the market and of the size of the
738:
287:{\displaystyle {\text{Effective Spread}}=2\times {\frac {|{\hbox{Trade Price}}-{\hbox{Midpoint}}|}{\hbox{Midpoint}}}\times 100}
687:
Bartram, Söhnke M.; Fehle, Frank R.; Shrider, David (May 2008). "Does
Adverse Selection Affect Bid-Ask Spreads for Options?".
731:
976:
17:
506:
531:
1001:
127:
995:
1478:
1418:
1214:
1120:
1204:
1172:
1076:
1030:
1013:
966:
1524:
989:
983:
476:
556:
Lee, Charles M. C. (July 1993). "Market
Integration and Price Execution for NYSE-Listed Securities".
203:{\displaystyle {\text{Quoted Spread}}={\frac {{\hbox{ask}}-{\hbox{bid}}}{\hbox{midpoint}}}\times 100}
1378:
1053:
1332:
1193:
1088:
971:
1220:
716:
1358:
1167:
1493:
1413:
1178:
1162:
1125:
1007:
950:
918:
63:
303:
isolates the cost of immediacy, also known as the "real cost". This spread is defined as:
8:
1423:
1368:
1292:
1152:
1082:
911:
884:
486:
443:
Gold and silver are known for having the tightest bid-ask spreads, making them useful as
428:
95:
1463:
1438:
1398:
1383:
1302:
1241:
1199:
943:
853:
843:
704:
630:
581:
540:
456:
530:
Demsetz, H. 1968. "The Cost of
Transacting." Quarterly Journal of Economics 82: 33–53
1327:
1312:
1064:
712:
708:
665:
661:
622:
573:
461:
418:
Inner price moves are moves of the bid-ask price where the spread has been deducted.
1428:
1348:
1144:
1025:
901:
820:
776:
754:
696:
657:
612:
565:
533:
134:
107:
91:
83:
79:
1503:
1498:
1433:
1408:
1343:
1317:
1297:
1256:
1251:
1246:
1231:
1226:
1114:
1048:
1040:
928:
815:
1458:
1453:
1353:
1338:
1099:
1094:
1059:
858:
825:
771:
763:
510:
1518:
1322:
1307:
1282:
1236:
1188:
891:
848:
835:
786:
669:
626:
577:
87:
1483:
1403:
1373:
1363:
1183:
1157:
906:
896:
879:
810:
805:
781:
466:
115:
111:
59:
55:
1488:
1468:
1448:
1443:
1388:
1277:
1209:
119:
30:
1473:
1393:
1070:
933:
634:
585:
544:
481:
700:
1109:
1104:
1019:
938:
471:
71:
67:
723:
686:
617:
600:
569:
537:
126:, dealers supply liquidity. However, on most exchanges, such as the
1287:
923:
114:) to the transaction supplies liquidity. Liquidity demanders place
58:) is the difference between the prices quoted (either by a single
1131:
874:
123:
75:
797:
444:
106:
The trader initiating the transaction is said to demand
384:
364:
341:
271:
259:
249:
187:
180:
170:
309:
225:
157:
406:
286:
202:
1516:
599:Lee, Charles M. C.; Ready, Mark J. (June 1991).
601:"Inferring Trade Direction from Intraday Data"
739:
421:
746:
732:
647:
616:
598:
29:
14:
1517:
753:
727:
555:
213:
140:
24:
680:
509:. Riskglossary.com. Archived from
438:
297:
94:. If the spread is 0 then it is a
25:
1536:
1002:Electronic communication network
145:
650:Journal of Financial Economics
641:
592:
549:
524:
499:
377:
335:
266:
244:
128:Australian Securities Exchange
118:and liquidity suppliers place
13:
1:
996:Multilateral trading facility
492:
70:) and an immediate purchase (
1419:Returns-based style analysis
1215:Post-modern portfolio theory
1121:Security characteristic line
662:10.1016/0304-405x(95)00867-e
101:
7:
1173:Efficient-market hypothesis
1077:Capital asset pricing model
1014:Straight-through processing
450:
435:101.92 JPY per US$ 1.
10:
1541:
990:Alternative Trading System
689:Journal of Futures Markets
477:Price elasticity of demand
1265:
1140:
1039:
959:
867:
834:
795:
761:
66:) for an immediate sale (
27:Financial markets concept
1054:Arbitrage pricing theory
422:Example: Currency spread
1333:Initial public offering
1194:Modern portfolio theory
1089:Dividend discount model
972:List of stock exchanges
110:, and the other party (
1221:Random walk hypothesis
605:The Journal of Finance
558:The Journal of Finance
507:"Spreads – definition"
408:
288:
204:
35:
1359:Market capitalization
1168:Dollar cost averaging
409:
289:
205:
33:
1179:Fundamental analysis
1163:Contrarian investing
1126:Security market line
1031:Liquidity aggregator
1008:Direct market access
919:Quantitative analyst
307:
223:
155:
1424:Reverse stock split
1369:Market manipulation
1293:Dual-listed company
1153:Algorithmic trading
1083:Capital market line
885:Inter-dealer broker
487:Underwriting spread
1464:Stock market index
1303:Efficient frontier
1242:Technical analysis
1200:Momentum investing
1022:(private exchange)
912:Proprietary trader
854:Shares outstanding
844:Authorised capital
404:
388:
368:
345:
284:
275:
263:
253:
200:
191:
184:
174:
96:frictionless asset
36:
1525:Financial markets
1512:
1511:
1313:Flight-to-quality
1065:Buffett indicator
755:Financial markets
701:10.1002/fut.20316
431:) is the spread.
396:
387:
367:
344:
314:
276:
274:
262:
252:
229:
192:
190:
183:
173:
161:
80:futures contracts
54:in the case of a
16:(Redirected from
1532:
1429:Share repurchase
1141:Trading theories
1026:Crossing network
984:Over-the-counter
821:Restricted stock
777:Secondary market
748:
741:
734:
725:
724:
720:
674:
673:
645:
639:
638:
620:
596:
590:
589:
564:(3): 1009–1038.
553:
547:
528:
522:
521:
519:
518:
503:
462:Demand and offer
413:
411:
410:
405:
397:
395:
394:
389:
385:
381:
380:
375:
374:
369:
365:
358:
357:
346:
342:
338:
332:
321:
320:
315:
312:
293:
291:
290:
285:
277:
272:
270:
269:
264:
260:
254:
250:
247:
241:
230:
228:Effective Spread
227:
214:Effective spread
209:
207:
206:
201:
193:
188:
186:
185:
181:
175:
171:
167:
162:
159:
141:Types of spreads
135:transaction cost
92:transaction cost
64:limit order book
21:
18:Bid–offer spread
1540:
1539:
1535:
1534:
1533:
1531:
1530:
1529:
1515:
1514:
1513:
1508:
1499:Voting interest
1409:Public offering
1344:Mandatory offer
1318:Government bond
1298:DuPont analysis
1261:
1257:Value investing
1252:Value averaging
1247:Trend following
1232:Style investing
1227:Sector rotation
1142:
1136:
1115:Net asset value
1041:Stock valuation
1035:
955:
863:
830:
816:Preferred stock
791:
757:
752:
683:
681:Further reading
678:
677:
646:
642:
618:10.2307/2328845
597:
593:
570:10.2307/2329024
554:
550:
538:10.2307/1882244
529:
525:
516:
514:
505:
504:
500:
495:
453:
441:
439:Example: Metals
424:
390:
383:
382:
376:
370:
363:
362:
347:
340:
339:
334:
333:
331:
316:
313:Realized Spread
311:
310:
308:
305:
304:
300:
298:Realized spread
265:
258:
248:
243:
242:
240:
226:
224:
221:
220:
216:
179:
169:
168:
166:
158:
156:
153:
152:
148:
143:
104:
28:
23:
22:
15:
12:
11:
5:
1538:
1528:
1527:
1510:
1509:
1507:
1506:
1501:
1496:
1491:
1486:
1481:
1476:
1471:
1466:
1461:
1459:Stock exchange
1456:
1454:Stock dilution
1451:
1446:
1441:
1436:
1431:
1426:
1421:
1416:
1411:
1406:
1401:
1396:
1391:
1386:
1381:
1379:Mean reversion
1376:
1371:
1366:
1361:
1356:
1354:Market anomaly
1351:
1346:
1341:
1336:
1330:
1325:
1320:
1315:
1310:
1305:
1300:
1295:
1290:
1285:
1280:
1275:
1273:Bid–ask spread
1269:
1267:
1263:
1262:
1260:
1259:
1254:
1249:
1244:
1239:
1234:
1229:
1224:
1218:
1212:
1207:
1202:
1197:
1191:
1186:
1181:
1176:
1170:
1165:
1160:
1155:
1149:
1147:
1138:
1137:
1135:
1134:
1129:
1123:
1118:
1112:
1107:
1102:
1100:Earnings yield
1097:
1095:Dividend yield
1092:
1086:
1080:
1074:
1068:
1062:
1057:
1051:
1045:
1043:
1037:
1036:
1034:
1033:
1028:
1023:
1017:
1011:
1005:
999:
993:
987:
986:(off-exchange)
981:
980:
979:
974:
963:
961:
960:Trading venues
957:
956:
954:
953:
948:
947:
946:
936:
931:
926:
921:
916:
915:
914:
909:
899:
894:
889:
888:
887:
882:
871:
869:
865:
864:
862:
861:
859:Treasury stock
856:
851:
846:
840:
838:
832:
831:
829:
828:
826:Tracking stock
823:
818:
813:
808:
802:
800:
793:
792:
790:
789:
784:
779:
774:
772:Primary market
768:
766:
759:
758:
751:
750:
743:
736:
728:
722:
721:
695:(5): 417–437.
682:
679:
676:
675:
656:(3): 313–357.
640:
591:
548:
523:
497:
496:
494:
491:
490:
489:
484:
479:
474:
469:
464:
459:
457:Bid–ask matrix
452:
449:
440:
437:
423:
420:
403:
400:
393:
379:
373:
361:
356:
353:
350:
337:
330:
327:
324:
319:
299:
296:
283:
280:
268:
257:
246:
239:
236:
233:
215:
212:
199:
196:
178:
165:
147:
144:
142:
139:
103:
100:
88:currency pairs
40:bid–ask spread
26:
9:
6:
4:
3:
2:
1537:
1526:
1523:
1522:
1520:
1505:
1502:
1500:
1497:
1495:
1492:
1490:
1487:
1485:
1482:
1480:
1477:
1475:
1472:
1470:
1467:
1465:
1462:
1460:
1457:
1455:
1452:
1450:
1447:
1445:
1442:
1440:
1437:
1435:
1434:Short selling
1432:
1430:
1427:
1425:
1422:
1420:
1417:
1415:
1412:
1410:
1407:
1405:
1402:
1400:
1397:
1395:
1392:
1390:
1387:
1385:
1382:
1380:
1377:
1375:
1372:
1370:
1367:
1365:
1362:
1360:
1357:
1355:
1352:
1350:
1347:
1345:
1342:
1340:
1337:
1334:
1331:
1329:
1326:
1324:
1323:Greenspan put
1321:
1319:
1316:
1314:
1311:
1309:
1308:Financial law
1306:
1304:
1301:
1299:
1296:
1294:
1291:
1289:
1286:
1284:
1283:Cross listing
1281:
1279:
1276:
1274:
1271:
1270:
1268:
1266:Related terms
1264:
1258:
1255:
1253:
1250:
1248:
1245:
1243:
1240:
1238:
1237:Swing trading
1235:
1233:
1230:
1228:
1225:
1222:
1219:
1216:
1213:
1211:
1208:
1206:
1205:Mosaic theory
1203:
1201:
1198:
1195:
1192:
1190:
1189:Market timing
1187:
1185:
1182:
1180:
1177:
1174:
1171:
1169:
1166:
1164:
1161:
1159:
1156:
1154:
1151:
1150:
1148:
1146:
1139:
1133:
1130:
1127:
1124:
1122:
1119:
1116:
1113:
1111:
1108:
1106:
1103:
1101:
1098:
1096:
1093:
1090:
1087:
1084:
1081:
1078:
1075:
1072:
1069:
1066:
1063:
1061:
1058:
1055:
1052:
1050:
1047:
1046:
1044:
1042:
1038:
1032:
1029:
1027:
1024:
1021:
1018:
1015:
1012:
1009:
1006:
1003:
1000:
997:
994:
991:
988:
985:
982:
978:
977:Trading hours
975:
973:
970:
969:
968:
965:
964:
962:
958:
952:
949:
945:
942:
941:
940:
937:
935:
932:
930:
927:
925:
922:
920:
917:
913:
910:
908:
905:
904:
903:
900:
898:
895:
893:
892:Broker-dealer
890:
886:
883:
881:
878:
877:
876:
873:
872:
870:
866:
860:
857:
855:
852:
850:
849:Issued shares
847:
845:
842:
841:
839:
837:
836:Share capital
833:
827:
824:
822:
819:
817:
814:
812:
809:
807:
804:
803:
801:
799:
794:
788:
787:Fourth market
785:
783:
780:
778:
775:
773:
770:
769:
767:
765:
760:
756:
749:
744:
742:
737:
735:
730:
729:
726:
718:
714:
710:
706:
702:
698:
694:
690:
685:
684:
671:
667:
663:
659:
655:
651:
644:
636:
632:
628:
624:
619:
614:
610:
606:
602:
595:
587:
583:
579:
575:
571:
567:
563:
559:
552:
546:
542:
539:
535:
532:
527:
513:on 2012-08-15
512:
508:
502:
498:
488:
485:
483:
480:
478:
475:
473:
470:
468:
465:
463:
460:
458:
455:
454:
448:
446:
436:
432:
430:
419:
416:
401:
398:
391:
371:
359:
354:
351:
348:
328:
325:
322:
317:
295:
281:
278:
255:
237:
234:
231:
211:
197:
194:
176:
163:
160:Quoted Spread
146:Quoted spread
138:
136:
131:
129:
125:
121:
117:
116:market orders
113:
109:
99:
97:
93:
89:
85:
81:
77:
73:
69:
65:
61:
57:
53:
49:
45:
41:
32:
19:
1484:Tender offer
1404:Public float
1374:Market trend
1364:Market depth
1272:
1184:Growth stock
1158:Buy and hold
1067:(Cap-to-GDP)
907:Floor trader
897:Market maker
880:Floor broker
868:Participants
811:Golden share
806:Common stock
782:Third market
692:
688:
653:
649:
643:
608:
604:
594:
561:
557:
551:
526:
515:. Retrieved
511:the original
501:
467:Market maker
442:
433:
425:
417:
366:Traded Price
301:
217:
149:
132:
120:limit orders
112:counterparty
105:
60:market maker
56:market maker
51:
47:
43:
39:
37:
1489:Uptick rule
1469:Stock split
1449:Squeeze-out
1444:Speculation
1389:Open outcry
1278:Block trade
1210:Pairs trade
251:Trade Price
1494:Volatility
1474:Stock swap
1394:Order book
1145:strategies
1071:Book value
939:Arbitrager
934:Speculator
611:(2): 733.
517:2019-04-24
493:References
482:Spot price
1110:Fed model
1105:EV/EBITDA
1020:Dark pool
951:Regulator
796:Types of
762:Types of
709:154229351
670:0304-405X
627:0022-1082
578:0022-1082
472:Mid price
399:×
360:−
329:×
279:×
256:−
238:×
195:×
177:−
108:liquidity
102:Liquidity
44:bid–offer
1519:Category
1439:Slippage
1399:Position
1384:Momentum
1288:Dividend
967:Exchange
924:Investor
451:See also
386:Midpoint
343:Midpoint
273:Midpoint
261:Midpoint
189:midpoint
62:or in a
52:buy/sell
1328:Haircut
1132:T-model
944:Scalper
764:markets
717:1089222
635:2328845
586:2329024
545:1882244
84:options
48:bid/ask
1349:Margin
1217:(PMPT)
1079:(CAPM)
929:Hedger
902:Trader
875:Broker
798:stocks
715:
707:
668:
633:
625:
584:
576:
543:
124:NASDAQ
76:stocks
74:) for
42:(also
1504:Yield
1479:Trade
1414:Rally
1335:(IPO)
1223:(RMH)
1196:(MPT)
1175:(EMH)
1128:(SML)
1117:(NAV)
1091:(DDM)
1085:(CML)
1056:(APT)
1049:Alpha
1016:(STP)
1010:(DMA)
1004:(ECN)
998:(MTF)
992:(ATS)
705:S2CID
631:JSTOR
582:JSTOR
541:JSTOR
445:money
86:, or
1339:Long
1143:and
1073:(BV)
1060:Beta
713:SSRN
666:ISSN
623:ISSN
574:ISSN
429:pips
50:and
38:The
697:doi
658:doi
613:doi
566:doi
534:doi
402:100
282:100
198:100
182:bid
172:ask
72:bid
68:ask
46:or
1521::
711:.
703:.
693:28
691:.
664:.
654:41
652:.
629:.
621:.
609:46
607:.
603:.
580:.
572:.
562:48
560:.
210:.
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82:,
78:,
747:e
740:t
733:v
719:.
699::
672:.
660::
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615::
588:.
568::
536::
520:.
392:k
378:|
372:k
355:1
352:+
349:k
336:|
326:2
323:=
318:k
267:|
245:|
235:2
232:=
164:=
20:)
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