What Is Bid-Ask Spread?
The difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask) for a security. A narrower spread indicates greater market liquidity and lower trading costs, while a wider spread reflects less liquid or higher-risk securities. Understanding spreads helps candidates assess transaction costs and market efficiency.
Bid-Ask Spread across 2 exams
Bid-Ask Spread appears on the following exams. Each defines it in the context candidates are tested on:
- SIE
- The difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask) for a security. A narrower spread indicates greater market liquidity and lower trading costs, while a wider spread reflects less liquid or higher-risk securities. Understanding spreads helps candidates assess transaction costs and market efficiency.
- Series 57
- The difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller will accept (ask); it represents a cost of trading and a source of market-maker profit.