bid–ask spread is the difference between bid and offer in stock market, except in the case of a market maker.
bid–ask spread is the difference between bid and offer in stock market, except in the case of a market maker.
difference between bid and offer in stock market, except in the case of a market maker?
bid–ask spread
the difference between the price at which a market maker is willing to buy a stock (the bid price) and the price that the firm is willing to sell it (the ask price) is known as the market maker spread, or bid–ask spread. supposing that equal amounts of buy and sell orders arrive and the price never changes, this is the amount that the market maker will gain on each round trip. market makers also provide liquidity to their own firm's clients, for which they earn a commission.









































section::::see also.









































bullet::::- sales and trading









































bullet::::- day trading
market maker
these developments heralded the appearance of "market makers": the nasdaq equivalent of a nyse specialist. a market maker has an inventory of stocks to buy and sell, and simultaneously offers to buy and sell the same stock. obviously, it will offer to sell stock at a higher price than the price at which it offers to buy. this difference is known as the "spread". the market maker is indifferent as to whether the stock goes up or down, it simply tries to constantly buy for less than it sells. a persistent trend in one direction will result in a loss for the market maker, but the strategy is overall positive (otherwise they would exit the business). today there are about 500 firms who participate as market makers on ecns, each generally making a market in four to forty different stocks. without any legal obligations, market makers were free to offer smaller spreads on electronic communication networks than on the nasdaq. a small investor might have to pay a $0.25 spread (e.g. he might have to pay $10.50 to buy a share of stock but could only get $10.25 for selling it), while an institution would only pay a $0.05 spread (buying at $10.40 and selling at $10.35).
day trading