Average Effective Spread is a current Regulation NMS defined term. This guide preserves the specific U.S. securities-rule scope instead of substituting an ordinary-language meaning.
ReviewedEvidence1 sourceSectionPhrases & Idioms
Quick answer
Under Regulation NMS, average effective spread is the share-weighted average of effective spreads for order executions, calculated from execution price and the midpoint of the national best bid and national best offer under the rule’s timing provisions.
Key details
Canonical FormAverage Effective Spread
Core MeaningUnder Regulation NMS, average effective spread is the share-weighted average of effective spreads for order executions, calculated from execution price and the midpoint of the national best bid and national best offer under the rule’s timing provisions.
Further guidance
History Boundary
This page reflects the current reviewed 17 CFR § 242.600 definition and should be rechecked if Regulation NMS is amended.
Meaning
Section 242.600 defines the metric using share-weighted effective spreads and specifies the relevant midpoint timing, including special timing for midpoint-or-better limit orders.
Usage Boundary
Keep the rule’s weighting and timing conditions; do not reduce the term to a generic average bid-ask spread.
Sources and evidence
Sources are shown with the role they play in this guide. Historical or style-sensitive claims are kept within the evidence boundary described above.
Average Percentage Effective Spread is a current Regulation NMS defined metric and should be read with the rule-defined average effective spread and average midpoint components.
Average Percentage Realized Spread is a current Regulation NMS defined metric; the page keeps its rule-defined denominator and does not substitute a generic percentage-spread meaning.
Average Quoted Spread is a current Regulation NMS defined term. This guide preserves share weighting and the special executable-time rule for midpoint-or-better limit-order executions.
Average Realized Spread is a current Regulation NMS defined term. This guide preserves its share weighting, buy/sell direction, post-execution timing, and final-trading-hours midpoint provision.
Effective spread is an execution-cost measure based on the distance between an execution price and the contemporaneous quote midpoint, conventionally expressed on a round-trip basis. Do not substitute the displayed quoted spread: price improvement or executions away from the quote can make effective spread differ from quoted spread.
Average Midpoint is a current Regulation NMS defined term. This guide preserves the share weighting and timing rules instead of reducing it to an ordinary arithmetic midpoint.
A bid-ask spread is the gap between quoted buying and selling prices and is one market-liquidity measure; wider spreads generally imply greater trading cost or compensation for liquidity provision. Treat the spread as one dimension of liquidity, not as a complete measure of market liquidity, depth, or price impact.
A “credit spread” compares the yield on credit-risky debt with a benchmark yield of comparable maturity. Federal Reserve discussion notes that corporate-bond spreads compensate for default and liquidity risks rather than representing a pure default probability.
