bidask

Bid-ask refers to the quotation structure in financial markets that shows the highest price a buyer is willing to pay (the bid) and the lowest price a seller is willing to accept (the ask or offer) for a security, commodity, or currency. The bid-ask spread is the difference between these two prices and serves as a key measure of market liquidity and trading cost. The mid-price, located halfway between bid and ask, is often used as a reference, though actual trades occur at the bid, the ask, or at prices in between.

In many markets, bids and asks are displayed in an order book, where buy and sell orders are organized by price and size. Market makers or dealers commonly post bid and ask quotes to provide liquidity, allowing trades to occur more readily. The spread can be narrow in highly liquid instruments and wider in less liquid ones or during periods of high volatility or reduced trading activity.

Several factors influence the size of the bid-ask spread, including liquidity, trading volume, volatility, time of day, and the competitiveness of trading venues. Regulatory rules, fees, and rebates paid to liquidity providers can also affect spreads. Different asset classes exhibit distinct typical spreads; for example, major currency pairs often have tight spreads, while small-cap equities or exotic instruments may exhibit wider spreads. Some venues also publish consolidated best bid and offer from multiple sources to give an overall sense of immediate liquidity.

Traders use the bid-ask spread to assess execution costs and choose between market orders, which accept the current quote, and limit orders, which specify a maximum or minimum acceptable price.