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Bid/offer spread meaning
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What does Bid/offer spread mean?
The bid/offer spread is the gap between the price at which an investor can sell (the bid) and the higher price they must pay to buy (the offer/ask) a security, fund unit or life policy unit. It reflects dealing costs, the intermediary’s margin and market liquidity, and directly affects subscription and redemption proceeds.
This is a descriptive market‑pricing term rather than one generally defined in legislation or case law, and is used across capital markets, authorised funds and life assurance.
In UK authorised unit trusts/OEICs and Irish UCITS/AIFs, dual‑priced funds quote separate bid and offer prices; the spread may include an initial charge by the manager or life company and underlying transaction costs. Historically, some life and unit‑linked products applied spreads around 5%, though current levels vary by asset class and distribution channel. Many funds now use single pricing with dilution adjustment or swing pricing, but a spread persists at market level and may apply to legacy or dual‑priced products.
Regulatory disclosure of pricing and charges is required (for example, under FCA COLL/COBS and the Central Bank of Ireland UCITS/AIF Rulebook, and in UCITS/PRIIPs KIDs). The spread is relevant to best execution (MiFID II), valuation, damages assessments and costs and charges analysis....
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NEWS
Environmental law update for England, Wales and Scotland: sludge regulation JR, EIR course of completion, POCA cotton imports ruling, Scottish cup charge consultation, Defra catchment permitting, and new trackers
In this issue: Environmental disputes and proceedings Environmental information Environmental issues in transactions Waste producer responsibility regimes Water Daily and weekly news alerts New and updated content Trackers Useful information Environmental disputes and proceedings R (on the application of Fighting Dirty Limited) v Environment Agency The Administrative Court rejected the claimant company’s (FDL) bid for judicial review concerning how sludge is environmentally regulated when spread on farmland. The claimant was a private company limited by guarantee with no share capital (that is, not-for-profit), founded by its three directors as a campaign group dedicated to finding and contesting legal and policy routes that enable pollution to reach the natural environment. Across all three versions, the sludge strategy set out a regulatory shift, regarded by the Agency as appropriate. That shift would transfer oversight of sludge used on agricultural land from the Sludge (Use in Agriculture) Regulations 1989, SI 1989/1263, to revised arrangements under the Environmental...
29 August
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View the related Practice Notes about Bid/offer spread
PRACTICE NOTES
European Commission Article 101 TFEU decision: Swiss franc LIBOR manipulation and bid-ask spread cartel in interest rate derivatives; fines for RBS, JPMorgan, UBS and Crédit Suisse (21 October 2014)
CASE HUB ARCHIVED This archived case hub reflects the position as at the decision date of 21 October 2014; it is no longer maintained. See further, timeline, commentary and related cases. Case facts Outline European Commission Article 101 TFEU investigation into cartels in the Swiss franc interest rate derivatives sector (Case COMP/39.924). The Commission identified two distinct infringements—one concerning bid-ask spreads and another relating to influencing the Swiss franc LIBOR interest rate. Settlements and fines for both infringements were announced on 21/10/2014. Parties RBS (active in both the Swiss franc LIBOR cartel and the bid-ask spreads cartel) JPMorgan (active in both the Swiss franc LIBOR cartel and the bid-ask spreads cartel) UBS (active in the bid-ask spreads cartel) Crédit Suisse (active in the bid-ask spreads cartel) Market(s) Swiss franc interest rate derivatives in the EEA. Derivatives are contracts traded on financial markets. They manage the risk of interest rate movements, act as insurance against price...
21 May
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