If you’ve ever traded shares, ETFs, or even cryptocurrency, you’ve encountered the bid-ask spread—even if you didn’t realise it. In 2025, as trading technology evolves and market volatility remains high, understanding this subtle cost is more crucial than ever for Australian investors. Let’s break down what the bid-ask spread is, how it affects your investments, and what you can do to keep more money in your pocket.
What Is the Bid-Ask Spread?
The bid-ask spread is the difference between the highest price a buyer is willing to pay (the bid) and the lowest price a seller is willing to accept (the ask) for a security. It’s a built-in feature of every market—from the ASX to global crypto exchanges.
- Bid: The price you’ll get if you sell immediately.
- Ask: The price you’ll pay if you buy immediately.
- Spread: The gap between these two prices, usually quoted in cents or as a percentage.
On high-volume shares like Commonwealth Bank (CBA), the spread might be just a cent or two. For less-traded small caps or certain ETFs, it can be much wider, quietly eating into your returns.
Why the Bid-Ask Spread Matters in 2025
Many Australians overlook the bid-ask spread, focusing instead on brokerage fees. But in 2025, with rising retail trading activity and new asset classes like tokenised assets gaining traction, spreads have become a key cost to watch.
- Trading Costs: Every time you buy and sell, the spread can add up—especially if you trade frequently.
- Market Liquidity: Spreads are tightest on liquid, popular securities. Thinly traded or speculative stocks often have much wider spreads.
- Policy Changes: The ASX’s ongoing rollout of its CHESS replacement system and new ASIC regulations in 2025 have both aimed to improve market transparency, but spreads can still widen in volatile markets or during major economic announcements.
Real-world example: Imagine you want to buy shares in an emerging lithium miner on the ASX. The bid is $1.98 and the ask is $2.04. If you buy at the ask and immediately sell at the bid, you lose 6 cents per share—before brokerage or tax. In a large position, that’s real money left on the table.
Factors Influencing the Spread in Australian Markets
Spreads aren’t random; they reflect real market forces. Here’s what drives them wider or tighter:
- Liquidity: Blue-chip shares like BHP or CSL typically have minimal spreads, thanks to deep order books. Penny stocks or microcaps? Not so much.
- Volatility: In times of market turbulence—such as RBA cash rate decisions or global shocks—spreads can widen dramatically, even on major securities.
- Trading Hours: Spreads are usually tightest during regular ASX hours. Trading in the pre-open, after-hours, or on international platforms (like US stocks via Aussie brokers) often means wider spreads.
- Broker and Platform: Some platforms, especially those offering zero-commission trading in 2025, may route orders in ways that affect the prices you get. Always check the spread before executing a trade.
How to Minimise the Impact of the Bid-Ask Spread
While you can’t eliminate the spread, you can make smarter moves to reduce its bite:
- Trade Liquid Securities: Stick to stocks and ETFs with high daily volume and narrow spreads.
- Use Limit Orders: Rather than accepting the market price, set your own bid or ask. This helps avoid crossing a wide spread—especially in fast-moving markets.
- Time Your Trades: Trade during peak market hours when spreads are narrowest.
- Monitor Market Conditions: Be wary of trading during economic data releases or unexpected news, when spreads can spike.
- Check Platform Details: Review your broker’s execution policies and see if they offer price improvement or charge hidden spreads.
As more Australians jump into ETFs, crypto, and international stocks in 2025, being spread-savvy is a genuine edge. It’s not just about paying less—it’s about maximising every dollar invested.
The Bottom Line: Don’t Let the Spread Catch You Out
The bid-ask spread may seem like small change, but over time it can add up to a significant cost—especially for active traders and those dealing in less-liquid securities. By paying attention to spreads and making a few simple adjustments to how and when you trade, you can keep more of your hard-earned returns working for you.
