Overview

spread


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The difference between the bid and offer prices quoted by a market-maker. The prices of securities at which market-makers are willing to sell are higher than those at which they are willing to buy. The spread has to cover the market-makers' operating costs and provide profits, and includes a premium against the risk that any particular customer has insider knowledge about the security being traded. Spreads tend to be smaller on more widely traded securities.

Subjects: Economics.


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