If a trader placed a sell order, a dealer may offer a better bid price than the previous bid to earn the trader’s business. The midquote of the quoted bid and ask prices is $16.05. The effective spread for this sell order would then be calculated as: 2 × ($16.05 - $16.03) = $0.04, which is 6 cents better than the quoted spread of $0.10 ($16.10 - $16.00). |
