Market Maker Spread
What it is:
A market maker spread is the difference between the bid and ask prices offered by amaker.
How it works (Example):
The market maker spread is calculated by subtracting aask price (price at which he/she is willing to sell a security) from the bid price (price at which he/she is willing to purchase a security). The resulting number is the profit that the maker earns for each order processed.maker's
Why it Matters:
The size of a market maker spread is inversely correlated with the volume of trades conducted by the related market maker. In other words, a market maker that offers a small spread processes a high number of orders, and vice versa. Highly liquid markets tend to have very small spreads. Market maker spreads are regulated to prevent market price distortions.