Glossary term
Quoted Spread
Quoted spread is the difference between the best quoted ask price and the best quoted bid price for a security at a given moment.
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What Is Quoted Spread?
Quoted spread is the difference between the best quoted ask price and the best quoted bid price for a security at a given moment. If a stock has a best bid of $20.00 and a best ask of $20.05, the quoted spread is five cents.
The quoted spread is a visible measure of trading cost and liquidity. A narrower spread usually suggests deeper competition or easier trading, while a wider spread can signal lower liquidity, higher volatility, or greater risk to liquidity providers.
Key Takeaways
- Quoted spread is the displayed difference between the best bid and best ask.
- It is a simple liquidity and transaction-cost measure.
- Wider quoted spreads usually make immediate trading more expensive.
- The quoted spread can differ from the effective spread if trades execute inside or outside the displayed quotes.
- Spreads often widen during volatility, low liquidity, or market stress.
How Quoted Spread Works
The bid is the highest displayed price a buyer is currently willing to pay. The ask, or offer, is the lowest displayed price a seller is currently willing to accept. The difference between them is the quoted spread.
A trader who buys immediately may pay the ask. A trader who sells immediately may receive the bid. That gap is one reason immediate trading has a cost even when explicit commissions are low or zero.
Quoted Spread Versus Other Spread Measures
Measure | What it captures |
|---|---|
Quoted spread | Displayed bid-ask difference. |
Effective spread | Actual execution cost relative to midpoint. |
Realized spread | Execution economics after subsequent price movement. |
Percentage spread | Spread scaled by price, useful across different stock prices. |
How to Interpret It
Quoted spread is easiest to understand in liquid stocks, but it can be misleading if taken alone. A stock may show a narrow spread for a small number of shares but have little depth behind the quote. A larger order may move through multiple price levels and face more cost than the top-of-book spread suggests.
Quoted spread also does not reveal whether a broker obtained price improvement. A retail order may execute inside the spread, producing a lower effective spread than the displayed quoted spread.
Practical Interpretation
Quoted spread is easy to observe, but it can overstate or understate real trading cost. A marketable order may receive price improvement inside the spread, while a large order may sweep multiple price levels and pay more than the displayed spread suggests. That is why quoted spread is best treated as a starting indicator of liquidity, not the final cost measure.
The Bottom Line
Quoted spread is the visible gap between the best bid and best ask. It is a useful first look at liquidity and immediate trading cost, but it should be read with depth, execution quality, and effective spread.