EN
IT
EFFECTIVE SPREAD
It's a measure of trading costs, defined as the difference between the price at which a market order executes and the mid-quote on the market the instant before.
Formally we have:
Se ≡ d(p-m)
where: Se is the absolute effective spread, d is the order directionindicetor (1 for buyer-initiated and -1 for seller-initiated trades), m is the mid-quote on the market prior to the transaction executed at price p.
Editor: Maria Francesca NUZZO
