The difference between a market maker‘s (a dealer‘s) ask and bid price quotes at a given point in time. Traders and analysts use this spread as a measure of implicit trading costs. Some analysts consider it a dealer’s compensation for providing liquidity to the market. It is also used a a measure of market liquidity.
The quoted bid-ask spread account for three costs usually incurred by a dealer, literally: order processing costs, inventory costs, and adverse information costs.
