I heard that there is no bid-ask spread in futures markets. Could anyone explain why there would be no difference between the selling and buying price of a futures contract?
Thanks in advance!
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There is usually always at least 1-tick spread. I used to trade Bund and Treasury futures: For example there could be 500 bids for Bund futures at price 173.11, 800 at price 173.10, whilst there are 250 offers at 173.11 and 700 at 173.12. The 250 buy and sell orders at 173.11 clear immediately, then there would be 250 bids left (out of the original 500) at 173.11 and there would 700 offers at 173.12. If you wanted to buy, you'd have to pay 173.12, if you wanted to sell, you'd have to sell at 173.11.
In market distress, the bid-offer spread can easily widen to 5 ticks. During market data releases, algos take over and the price changes so quickly that a human trader has no chance to execute effectively. Also, for Bund futures, the bid-offer spread widens in the last hour of trading (9pm to 10pm european time). Additionally, the Bund and Treasury futures contracts expire in March, June, Sep, Dec each year: the last couple of days before expiry, the bid-offer spread can also widen.