bid-ask spread

Examples of bid-ask spread in the following topics:

• Market Maker

  • The difference between the highest bid and the lowest ask price is called the bid-ask spread .
  • Market makers are a company or individual that quotes both an ask price and a bid.
  • It is the bid-ask spread that provides the money-making opportunity.
  • A bid-ask spread of even a cent can mean a huge profit when trading thousands of shares.
  • There is a bid-ask spread of $1.10.

• Price Transparency

  • Rather, the dealers earn revenue by means of the spread, or difference, between the price at which the dealer buys a bond from one investor–the "bid" price–and the price at which he or she sells the same bond to another investor—the "ask" or "offer" price.
  • The bid/offer spread represents the total transaction cost associated with transferring a bond from one investor to another.

• NASDAQ

  • The NASDAQ helped lower the spread (the difference between the bid price and the ask price of the stock), but paradoxically was unpopular among brokerages because they made much of their money on the spread.

• Defining Spread

  • The bid–offer spread for securities is the difference between the prices quoted for an immediate sale (offer) and an immediate purchase (bid).
  • The size of the bid-offer spread in a security is one measure of the liquidity of the market and size of the transaction cost.
  • The bid–offer 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 transaction cost—brokerage fees and bid-offer spreads.
  • Under competitive conditions, the bid-offer spread measures the cost of making transactions without delay.

• Types of Market Organizations

  • When a client asks their broker to fill an order, it is the broker's job to track down trading partners.
  • Dealer markets, also called quote-driven markets, centers on market-makers (or dealers) who provide the service of continuously bidding for securities that investors want to sell and offering securities that investors want to buy.
  • Dealers earn a profit on the bid-offer spread.

• Valuing the Target and Setting the Price

  • To prepare an appropriate bid for a target company, the buyer has to accurately value the target company through the due diligence process.
  • In order to prepare an appropriate bid in the mergers and acquisition process, the buyer must be able to accurately value the target company.
  • Due diligence involves a reasonable investigation focusing on material future matters and the asking of certain key questions, including how do we buy, how do we structure the acquisition, and how much do we pay?

• NYSE

  • Buyers and sellers meet at a physical location (in this case, Wall Street) and announce their bid or ask prices.

• Discount Policy

  • Fed specifies the total amount of discount loans that it is willing to provide to the banks while the banks competitively bid for these funds.
  • Then the Fed uses the bidding process to set the interest rate for loans.
  • If a bank has trouble with liquidity or needs reserves, and it cannot borrow from other banks, subsequently, the Fed is the last place to go to ask for a loan.

• Variance

  • In probability theory and statistics, the variance is a measure of how far a set of numbers is spread out.
  • What if your bid for a house won't be accepted unless you can put at least $20,000 down?

• Federal Open Market Committee

  • When the Fed is ready to buy or sell government securities, the Fed ask these dealers to bid.