SIE Securities Industry Essentials Practice Exam – Practice Test & Study Guide

As the volume of trades increase, the competition between buyers and sellers typically increases as well. This increased competition often leads to a narrower spread between the bid and offer prices, as buyers are willing to pay slightly more and sellers are willing to accept slightly less to complete a trade. When the volume is low, the competition is also low, so the spread between bid and offer is typically wider. Additionally, a constant spread would indicate a lack of changes in market conditions, while an unpredictable spread would indicate erratic fluctuations in demand and/or supply.