The bid-ask spread is the difference between the buying price and the selling price. It is the difference between the foreign exchange buying rate and the selling rate, generally 1%-5%.
The calculation method of the bid-ask spread is: (selling price-buying price) / selling price × 100%.
The bid-ask spread constitutes the source of profit for the bank's foreign exchange trading business. The smaller the bid-ask spread, the more competitive the operation of the foreign exchange bank or the more developed the foreign exchange market.
For example, due to frequent transactions of the US dollar and the British pound, and the large transaction volume, they can form economies of scale. Therefore, in the New York and London foreign exchange markets, the bid-ask spread between the two currencies is only 0.5‰.