The bid-ask spread of an ETF (Exchange Traded Fund) is the difference between the highest price a buyer is willing to pay (the bid) and the lowest price a seller is willing to accept (the ask). In Singapore, ETF bid-ask spreads are an often-overlooked trading cost that can meaningfully impact returns — especially for investors who trade frequently or hold ETFs with low liquidity. This article is for educational purposes only and does not constitute financial advice.
How Bid-Ask Spreads Work for ETFs
Every time you buy or sell an ETF on SGX (or any stock exchange), you face a bid-ask spread. If an ETF is quoted at S$3.00 bid / S$3.02 ask, you pay S$3.02 when buying and receive S$3.00 when selling — a spread of S$0.02 per unit, or approximately 0.67%.
This spread represents an immediate cost the moment you transact. Unlike brokerage commissions (which you can see explicitly), bid-ask spreads are embedded in the transaction price and are often invisible to new investors.
Spreads are typically widest at market open and close, during periods of volatility, and for less-liquid ETFs with fewer market makers supporting the price.
Factors That Affect ETF Bid-Ask Spreads in Singapore
Liquidity of underlying assets: ETFs tracking liquid indices (like the S&P 500 or Straits Times Index) have tighter spreads because market makers can easily hedge their positions. ETFs tracking illiquid or exotic underlying assets (like frontier markets or niche sectors) have wider spreads.
Trading volume: High-volume ETFs on SGX attract multiple market makers competing to offer tight spreads. Low-volume ETFs — even if they track a quality index — may have wide spreads due to thin order books.
Market hours: For ETFs tracking overseas markets (e.g. a US equity ETF), spreads on SGX may widen when the US market is closed, as market makers face higher hedging uncertainty.
ETF size (AUM): Larger ETFs with more assets under management tend to have tighter spreads because they attract more market maker participation.
ETF Bid-Ask Spreads vs Total Expense Ratio
Many investors focus solely on an ETF’s Total Expense Ratio (TER) when comparing costs. But for active or regular traders, the bid-ask spread can dwarf the TER in terms of total cost impact.
Example: An ETF with a TER of 0.20% per annum but a bid-ask spread of 0.50% costs you 0.50% every time you buy and 0.50% every time you sell. If you trade quarterly, that’s 2%+ in spread costs alone — far more than the annual TER.
For long-term buy-and-hold investors who transact rarely, bid-ask spreads are a one-off cost that matters less than the TER. For frequent traders or those using dollar-cost averaging on a monthly schedule, minimising spreads is critical.
Use the Total Expense Ratio ETF Calculator on The Kopi Notes alongside spread analysis to get the full cost picture.
How to Minimise Bid-Ask Spread Costs in Singapore
Use limit orders: Instead of placing a market order (which executes at the best available ask price), use a limit order at or near the midpoint of the bid-ask spread. You may not always get filled immediately, but you avoid paying the full spread.
Trade during peak hours: Spreads are generally tightest during active trading hours when liquidity is highest — typically mid-morning on SGX (10am–12pm SGT) and when overseas markets overlap.
Choose high-volume ETFs: When selecting between two ETFs tracking similar indices, check their average daily trading volume on SGX. Higher volume = tighter spreads.
Consider US-listed ETFs: For exposure to global markets, US-listed ETFs (like VWRA on London Stock Exchange or VT on NYSE) often have extremely tight spreads due to massive daily volumes. However, currency conversion costs and withholding tax implications must also be considered.
ETF Spread Comparison: Popular SGX-Listed ETFs
As at Q1 2026, popular SGX-listed ETFs like the Nikko AM STI ETF and SPDR Straits Times Index ETF typically have spreads of 0.05%–0.15% — very tight relative to niche or smaller ETFs. In contrast, ETFs tracking narrower indices or less-liquid assets may have spreads of 0.30%–1.00% or wider.
Always check the ETF’s live order book on SGX or your brokerage platform before transacting. For a detailed comparison of Singapore ETFs including cost structures, the Singapore REIT ETF Guide on The Kopi Notes provides a comprehensive overview.
Frequently Asked Questions
What is a bid-ask spread for ETFs in Singapore?
The bid-ask spread is the difference between the highest price buyers will pay (bid) and the lowest price sellers will accept (ask) for an ETF unit. It represents an implicit trading cost — you buy at the ask and sell at the bid, so the spread is what you ‘lose’ on each round-trip trade.
How does the bid-ask spread affect my ETF investment returns?
Every time you buy or sell an ETF, you effectively pay half the spread as a cost (buying at ask vs midpoint, selling at bid vs midpoint). For a spread of 0.5%, you lose approximately 0.5% on purchase and 0.5% on sale — totalling 1% per round-trip trade. For frequent traders, this adds up significantly.
Which ETFs listed on SGX have the tightest bid-ask spreads?
Large, high-volume ETFs like the Nikko AM STI ETF (G3B) and SPDR STI ETF (ES3) typically have the tightest spreads (0.05%–0.15%) due to high daily trading volumes and multiple market makers. Smaller or niche ETFs may have spreads of 0.30% or wider.
Should I use a market order or limit order when buying ETFs?
For ETFs with wide bid-ask spreads, limit orders are preferable. A limit order lets you specify the maximum price you’ll pay, potentially filling somewhere between the bid and ask. Market orders execute immediately at the ask price, guaranteeing you pay the full spread.
Does the ETF bid-ask spread matter for long-term investors?
Less so for buy-and-hold investors who trade infrequently. If you buy an ETF once and hold it for 10 years, the one-time spread cost is spread across thousands of days of holding — its impact per day is negligible. Bid-ask spreads matter most for investors who trade frequently or use regular DCA contributions.