[steveBK123]

Spreads on bid/ask used to literally be at least 25cents, they didn't even use decimals. Would you rather pay 1 guy in a funny jacket with a palm pilot in NY 25 penny or a bunch of computer nerds sniping each other 1 penny?

Let's say you buy $10k of some $50 stock today and decide to sell tomorrow. In the old days you'd have paid say $10 to your broker to buy, and $10 again to sell. Your bid-ask spread in isolation of any price changes in the stock would be 25cents per share x ($10k / $50 = 200 shares) = another $50 in spread. So you're all-in transaction costs would have been $70.

Now you probably have a no-fee brokerage, and generally a penny spread. So same formula is 1cent per share x (200 shares) = $2 in spread + $0 in fees. So you're all-in transaction costs would be $2.

$2 vs $70 on $10k round trip investment. 2bps vs 70bps.