RealizedSpread

The share of a trade's effective spread that a liquidity provider keeps once the mid has moved over a fixed horizon. Effective spread net of price impact — the adverse-selection-adjusted revenue.

Quick reference

Item	Value
Family	Microstructure
Input type	TradeQuote — a trade plus the mid prevailing at execution
Output type	f64 (basis points)
Output range	unbounded
Default parameters	horizon required (≥ 1)
Warmup period	horizon + 1
Interpretation	Liquidity-provision revenue / adverse selection

Formula

realizedSpread = 2 · D · (tradePrice − mid_{t+horizon}) / mid_t · 10_000   (bps)

D is the aggressor sign, mid_t the mid at the trade, mid_{t+horizon} the mid horizon trade-quotes later. Because effective = realized + 2 · impact, the realized spread is the effective spread with the post-trade price impact removed. O(1) per update via a small ring buffer. See crates/wickra-core/src/indicators/realized_spread.rs.

Parameters

Name	Type	Default	Constraint	Description
horizon	usize	none	≥ 1	Number of trade-quotes until the future mid that resolves a trade.

Inputs / Outputs

Indicator<Input = TradeQuote, Output = f64>. Bindings: update(price, size, is_buy, mid). Each update buffers the current trade and emits the realized spread for the trade made horizon updates ago, so the returned value lags the input by horizon. Python / Node batch take four equal-length arrays and return a 1-D array (NaN during warmup). WASM streaming-only.

Warmup

warmup_period() == horizon + 1; update returns None until the first trade can be resolved against its future mid.

Edge cases

• No mid move. If the mid is unchanged over the horizon, realized equals the effective spread.
• Adverse selection. A trade that precedes a move in its own direction reads a low or negative realized spread — the quote was picked off.
• Zero horizon. Rejected at construction (horizon ≥ 1).

Examples

Rust

use wickra::{Indicator, RealizedSpread, Side, Trade, TradeQuote};

let mut rs = RealizedSpread::new(1).unwrap();
let tq = |p, side, mid| TradeQuote::new(Trade::new(p, 1.0, side, 0).unwrap(), mid).unwrap();
assert_eq!(rs.update(tq(100.10, Side::Buy, 100.0)), None); // buffered
// Resolved one trade later against mid 100.20:
assert!((rs.update(tq(99.90, Side::Sell, 100.20)).unwrap() - (-20.0)).abs() < 1e-9);

Python

import wickra as ta

rs = ta.RealizedSpread(1)
rs.update(100.10, 1.0, True, 100.0)        # None, buffered
print(rs.update(99.90, 1.0, False, 100.20))  # -20.0 bps (adverse selection)

Node

const { RealizedSpread } = require('wickra');

const rs = new RealizedSpread(1);
rs.update(100.10, 1, true, 100.0);            // null
console.log(rs.update(99.90, 1, false, 100.20)); // -20 bps

Interpretation

Realized spread approximates the revenue a liquidity provider keeps per trade once the market has had a horizon to reveal information.

• High and positive. The maker captured most of the spread — the trade was uninformed (liquidity-driven) and the mid barely moved against the quote.
• Low or negative. Adverse selection: the trade carried information, the mid moved in the aggressor's favour, and the maker was picked off. Persistent negative readings flag toxic flow.
• Effective = realized + 2 × impact. The gap between the EffectiveSpread and the realized spread is twice the price impact — the decomposition Huang & Stoll formalised.

It is the headline metric for grading market-making profitability and for sizing the adverse-selection cost a venue's flow carries.

Common pitfalls

• The output is time-shifted. A value emitted now describes the trade horizon updates in the past; line it up against the originating trade, not the current one, when attributing PnL.
• Horizon is in trades, not clock time. horizon counts trade-quotes, so its wall-clock length stretches and shrinks with activity. Pick it to match the information half-life of your venue, not a fixed number of seconds.
• Needs a clean future mid. The resolving mid must be the genuine post-trade mid; a stale or crossed quote horizon steps later poisons the reading.

References

• Roger D. Huang and Hans R. Stoll, Dealer versus Auction Markets, Journal of Financial Economics, 1996 — the realized-spread / price-impact split.
• Hendrik Bessembinder and Herbert M. Kaufman, A Comparison of Trade Execution Costs for NYSE and NASDAQ-Listed Stocks, JFQA, 1997.
• David Easley, Marcos López de Prado, Maureen O'Hara, Flow Toxicity and Liquidity in a High-Frequency World, Review of Financial Studies, 2012 — adverse selection and toxic flow.

See also

• EffectiveSpread — the gross per-trade cost this nets price impact out of.
• KylesLambda — the price-impact slope that fills the effective-minus-realized gap.
• Microprice — a fair value that anticipates the move.
• Indicators-Overview — the full taxonomy.