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.
ReviewedEvidence2 sourcesSectionPhrases & Idioms
Quick answer
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.
Key details
Canonical Formeffective spread
Core MeaningEffective 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.
Further guidance
History Boundary
Current authoritative financial meaning is published without claiming an exact inventor, coinage date, or absolute first use.
Meaning
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.
Usage Boundary
Do not substitute the displayed quoted spread: price improvement or executions away from the quote can make effective spread differ from quoted 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 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.
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.
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.
A national market system plan approved by the Securities and Exchange Commission, temporarily or permanently, pursuant to § 242.608. Keep the approval and § 242.608 scope in the definition; this is not a generic label for any market-system operating plan.
