18% spread, what that meanns for those that are unaware5 Nov 2025 13:37
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In the UK AIM market (Alternative Investment Market) — which is a sub-market of the London Stock Exchange designed for smaller, growing companies — a large spread (i.e., a big difference between the bid and ask price) signifies several important things about the stock:
1. Low Liquidity
This is the main reason for a large spread.
It means there aren’t many buyers and sellers actively trading the stock.
As a result, market makers widen the spread to compensate for the risk of holding an illiquid asset.
2. Higher Volatility / Risk
A wide spread often reflects uncertainty about the company’s value.
AIM-listed companies tend to be smaller and less established, so their prices can fluctuate more sharply on small trading volumes.
3. Higher Transaction Costs
For investors, a large spread means a bigger “hidden cost” when buying or selling — you effectively pay more to enter and exit a position.
4. Market Maker Caution
Market makers on AIM set spreads to protect themselves from price swings or difficulty in finding counterparties.
A wider spread compensates them for that extra risk.
Example:
If a stock is quoted at 90p–100p, the spread is 10p (about 10%).
That’s relatively wide compared to a large-cap FTSE 100 stock, which might have a spread of less than 0.1%.
➡️ In short:
A large spread on the AIM market usually means the stock is illiquid, risky, and lightly traded, so investors should tread carefully.
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