Bid/Ask Spread

Bid/Ask Spread refers to the difference between the bid and ask quotations between the buyers and sellers. The difference between the buyers’ maximum bidding price and sellers’ minimum asking price is often termed Sale Spread as well.

The bid/ask spread is normally expressed as a percentage of the ask quote. It becomes the measure of an asset’s liquidity. The highest bid/ask spread means the most liquid securities, currencies being the most liquid of them.


For example, commercial banks charge certain fees for conducting foreign transactions and currency exchanges. At any given point in time, a bank’s bid (buy) quote for a foreign currency will be less than its ask (sell) quote. As mentioned before, the bid/ask spread represents the differential between the bid and ask quotes and is intended to cover the costs involved in accommodating requests to exchange currencies. 


Use of the Term in Sentences

  • Because they utilize this information to calculate the bid/ask spread, market makers are well aware of a security's demand and supply.
  • In addition to tighter bid/ask spreads for your trades, technology promises lower transaction, settlement, and custodian costs, as well as fast access to your digitised account, which holds your deposits, debt instruments, and stocks in numerous currency denominations.
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