The following statistics on Effective Spread show monthly changes in the ratio between Effective Spread and the Average Quoted Spread.

Executions represent market orders with share sizes between 100-4,999 shares excluding pre-opening orders, executed as agent through 3rd party Nasdaq Market Makers and Listed Specialists, and as principal by National Financial Services Market Makers. Analysis includes only those exchanges or Market Makers receiving at least 5% of Fidelity Brokerage Services, LLC monthly Nasdaq and Listed share volume. Source: TTA (Thompson Transaction Analytics)

What is Effective Spread?

Effective Spread measures the distance from the midpoint of the market at the time when your order is entered to the execution price you receive. This value is doubled to capture the whole bid/offer spread.

For example:
A stock is quoted with a bid of $10.00 and an ask of $10.04 at the time your order is entered. The quoted spread is $0.04. The midpoint price is $10.02 and your buy order is executed at $10.03. The difference between the midpoint ($10.02) and your execution price ($10.03) is $.01. This value is doubled, so the effective spread on your order is $.02. The lower the effective spread value, the better.

Effective Spread calculates how much above the midpoint price you paid on a buy order and how much below the midpoint price you received on a sell order.

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