The bid-ask spread of an ETF is the difference between the highest price a buyer will pay (bid) and the lowest price a seller will accept (ask). In Singapore, ETF bid-ask spreads are an often-overlooked trading cost that can meaningfully affect returns — especially for investors who trade frequently or hold ETFs with low liquidity. This 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, 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 buying and receive S$3.00 selling — a spread of S$0.02 (0.67%). Unlike brokerage commissions (visible), bid-ask spreads are embedded in the transaction price and invisible to new investors. Spreads are typically widest at market open/close, during volatility, and for less-liquid ETFs.
Factors Affecting ETF Bid-Ask Spreads
Underlying asset liquidity: ETFs tracking liquid indices (STI, S&P 500) have tighter spreads. Niche or frontier market ETFs have wider spreads. Trading volume: High-volume ETFs attract multiple competing market makers. Market hours: For US-market ETFs on SGX, spreads widen when US markets are closed. ETF AUM: Larger ETFs attract more market maker participation and tighter spreads.
Bid-Ask Spread vs Total Expense Ratio (TER)
Many investors focus on TER but ignore spread costs. For active traders, spreads can dwarf the TER. Example: a TER of 0.20% p.a. vs a spread of 0.50% per trade — if you trade quarterly, that’s 2%+ in annual spread costs vs 0.20% TER. For long-term buy-and-hold investors transacting once, spread is a one-off cost dwarfed by TER over time. Know which you are.
How to Minimise Bid-Ask Spread Costs
Use limit orders: Place at or near the midpoint of the bid-ask spread — you may not fill immediately but avoid paying the full spread. Trade during peak hours: Mid-morning on SGX (10am–12pm SGT) typically has tightest spreads. Choose high-volume ETFs: When two ETFs track similar indices, pick the higher-volume one. Consider overseas-listed ETFs: US or London-listed ETFs (VWRA, VT) often have extremely tight spreads but bring currency and withholding tax considerations.
SGX ETF Spread Examples
As at Q1 2026, popular SGX-listed ETFs like the Nikko AM STI ETF and SPDR STI ETF typically have spreads of 0.05%–0.15% — very tight due to high volume. Niche sector ETFs may have spreads of 0.30%–1.00%. Always check the live order book on SGX or your brokerage before transacting. For a comprehensive ETF overview, see the Singapore REIT ETF Guide. Use the DCA Investment Calculator to model how frequent investing affects your overall cost basis.
Frequently Asked Questions
What is a bid-ask spread for ETFs in Singapore?
The bid-ask spread is the gap between the highest buy price (bid) and the lowest sell price (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 effectively pay on each round-trip transaction.
How does the bid-ask spread affect ETF returns?
Every time you buy or sell an ETF, you pay roughly half the spread as a cost (buying at ask vs midpoint; selling at bid vs midpoint). For a 0.5% spread, you lose approximately 0.5% on purchase and 0.5% on sale — 1% per round-trip. For frequent traders, this compounds significantly over time.
Which SGX-listed ETFs 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 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 specifies the maximum price you’ll pay, potentially filling between bid and ask. Market orders execute immediately at the ask price, guaranteeing you pay the full spread.
Does the bid-ask spread matter for long-term ETF investors?
Less so. If you buy and hold for 10 years, a one-time spread cost is negligible spread across thousands of holding days. Bid-ask spreads matter most for frequent traders or those making regular monthly DCA contributions into ETFs.