Bid/Offer Spread

General
1

Hi All,

I have a question about the bid/offer spread.

I had placed a £400 buy order yesterday (25th April) for SPDR MSCI World ETF. In the evening yesterday, I received an email from InvestEngine summarising the execution details of my buy order -

SPDR MSCI World: SWLD
Bought 17.552370 @ £22.60 per share
Total: £396.64
ISIN: IE00BFY0GT14, Order ID: 77415/669293, Traded at 2.07pm GMT/UTC

The difference of £3.36 (£400 - £396.64) seem big considering the fact that this ETF’s expense ratio is just 0.12%. Apparently the remaining 0.72% in this case seems to be the bid/offer spread.

This ETF’s page on the provider’s website (SWRD | SPPW : SPDR® MSCI World UCITS ETF) is €0.01.

I have noticed similar gaps in some of my other trades too on InvestEngine.

Do any of you face similar spreads/costs?
If this is indeed the bid/offer spread, then do you know why that spread is so high when yhe provider’s website says only €0.01?

Any info on this would really help me.

Many thanks,
Shalin

2

Hi Shalin,

the bid/offer spread should already be included in the price per share (£22.60 in you case). If you want to compute it, you should take the real-time price per share at the instant in which the broker made the transaction and compare it with the price reported in IE’s summary. So far, the bid/offer spread with IE has always been quite small in my experience.

I think the issue in your case is that sometimes it may happen that the number of shares bought does not perfectly match the full amount of the order you placed. I guess this is due to the “fractionalisation” process of the shares and/or to small real-time fluctuations in the share price. In this case, however, the small fraction of the order which has not been used does not disappear but remains as cash in your account. Have you checked if your cash balance has changed after the order?

Best,
Filippo

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3

I think it is because IE don’t use the entire amount you paid in any one go in case price fluctuations cause the shareprice to go to a point you can’t afford. They always leave a small cash buffer to stop your account from potentially going overdrawn. If you have auto-invest on then the remainder of your cash should be invested the following day.

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4

Thanks a lot for your explanations @FilippoG and @GeeDub

Your reasoning is spot on. I see the difference in amount (order placed minus trade executed) added as cash in my account. No reason to panic! :slight_smile:

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