Realized Spread
Market Microstructure glossary · Spread Economics & Liquidity Measurement
Definition
The dealer's actual profit per trade, measured as twice the signed difference between the trade price and the midpoint at a specified time after the trade.
Realized Spread in plain English
When a dealer sells you a stock, they've made a profit only if the price doesn't immediately move against them — the realized spread measures that actual, kept profit. You compare the price the dealer traded at to the market's 'true' middle price a little while LATER (say a few minutes after), because by then you can see whether the trade was really a good deal for them or whether the price ran away. It answers the question, 'After the dust settled, how much did the dealer really pocket?' — which is often less than the raw buy-sell gap suggests, since some trades happen right before the price shifts.
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