The spread is the difference between the highest bid (buy order) and the lowest ask (sell order) in an order book.

Tight spreads signal competitive quoting and strong liquidity. They reduce execution cost, support larger trade sizes, and enable more efficient price discovery. Wide spreads increase trading friction, discourage institutional participation, and amplify short-term volatility.

Exchanges monitor spread stability when assessing market quality. Persistent wide spreads are often interpreted as weak liquidity infrastructure. Spread discipline is therefore a core liquidity KPI — not a cosmetic metric.