Bid Ask spread

heno55

hi does anyone know why there is such a big spread in the bid ask spread on irish shares, even with an 11% rise on some shares i would take a loss if i sold them because of the size of the spread, this is on shares with a value between 1000 and 1500 euros.

ixus

Possibly a liquidity issue? Thinly traded stocks have a larger spread as the market maker has the risk of having to hold onto the stock.

Also, maybe the large swings in % changes in Irish stocks are not attractive to market makers so they have a large spread to incentivise them to trade.

MikeCork2009

A large spread usually exists when a market is not being actively traded, and has low volume (number of contracts being traded). The ISEQ, made up of only 57 stocks, will often have low volume. Given that the index is heavily biased on one end with banking and construction stocks (a few stocks account for most of the index trade) and the lack of appetite among investors for these stocks at the moment, then it’s no surprise to see low trading volume and therefore large spreads. You will often see the spread increase even in very liquid markets, like the FTSE or NASDAQ, during lunch, around public holidays or when traders are waiting for an economic news release.

heno55

thanks for the replies, it clears it up for me as the stocks i am refering to have low liquidity

shamblertine

Whats the usual premium you have to pay for OTC stocks? I tried to buy a stock at a price about 20% above its current price but wasn't able to.