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Should the Mid Price always be equal to the average of Bid and Ask Prices or can brokers and dealers quote a Mid Price that is within Bid and Ask but isn't the average?

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  • Perhaps it is a weighted average based on the volumes of bid and ask?
    – Marcus D
    Jul 8, 2016 at 19:30
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    Why are you interested in a midprice?
    – quid
    Sep 6, 2016 at 21:38
  • Due to this being a popular pricing policy choice in institutional investors. Sep 6, 2016 at 21:53

1 Answer 1

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It is...

A reference price calculated by taking the average of the current quoted bid and ask prices. As the average between the high and low quoted prices, the mid-price expresses a general market value for an asset. However, since exchange prices are rounded to the nearest valid tradable price, the mid-price value may not be an exact average of bid and ask values.

Read more: http://www.investorwords.com/17364/mid_price.html#ixzz4Dqd9S8ay

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  • That is exactly the situation where we're seeing discrepancies. The Mid price our analysts calculate and price to is not rounded and the Mid Price on Bloomberg is different because of rounding. Jul 8, 2016 at 19:56
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    @AmmarNaseer If the difference is so small that it appears to be a rounding error, then it's more likely that the difference is actually due to time differences in your feeds. If the feed that Bloomberg uses is ahead of yours (or vice versa) for a few hundredths of a second every time the book changes, and the book changes tens of times per second, then you'll constantly be computing different midpoint prices.
    – dg99
    Jul 8, 2016 at 20:18
  • I guess that could be material. I just noticed the some options such as CNI trade in 5 cent increments. Jul 9, 2016 at 13:18

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