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Showing posts with the label Arthur Levitt

Spreads

The move of US exchanges into penny pricing in the 1990s is sometimes given credit for lessening something called a "spread," and thus to a degree the price of purchased securities. Let's pause on this point. The spread is the difference between the bid and ask prices at any moment: that is, the highest price that a would-be buyer has offered (that no one yet has accepted) on the one hand, and the lowest process that a would-be seller has asked for (with the same qualification, which I will hereafter drop) on the other. Books and articles and even blog posts that purport to teach you how to trade -- and this is emphatically not one of them -- will talk a good deal about which one of you should be the one to "cross the spread." It can all sound a bit like the musings of the wallflowers at a junior high school dance. As prices came to be quoted in smaller and smaller increments, there were (as the SEC expected there would be) greater opportunities for trad...