What is a spread?

Alexander Smaznev
Alexander Smaznev
December 22, 2014
What is a spread?

The word "spread" came to the Russian language from English quite recently, about 10 -15 years ago. Today, it is used both by producers (and consumers) of butter substitute, and by players in financial markets. The emergence of this term is associated with the emergence of new economic realities in our post-Soviet space. This is the need for financially viable substitutes for natural products, and the opportunity to earn (or try to earn) by buying and selling currency, precious metals, stocks on stock exchanges.

Spread as a product

In English, the word spread means "spreading, stretching, spreading, smearing." Most people come across this concept when they buy a product that looks like butter in the store. In English-speaking countries, the spread is called any product that can be spread with a knife on bread. In Russia, with the introduction in 2004 of the new GOST, the notions of "spread" and oil were delimited. Butter is made only from cow's milk and cream, that is, only from animal fats. Natural oil is a very expensive product.For the production of 1 kg of oil goes up to 25 liters of milk.

Vegetables are added to the spread along with animal fats. To get a creamy taste that simulates butter, a spread of 10% of animal fat is enough for a spread. Vegetable fats are cheaper, so the reasons for the wide spread of spreads are financial and economic.

However, the fact that the spread is not a natural creamy product does not mean that it is worse or more harmful than butter. The quality of the spread depends on what components are added to it. For example, polysaturated fatty acids in vegetable fats have a beneficial effect on health, but they are not in butter.

Read also the article How to change the oil.

What is a Forex spread?

The term "spread" in a different sense is familiar to traders - traders on stock exchanges, such as the Forex currency exchange. Here "spread" is the difference between the sale price and the purchase price of a currency.

It is difficult for a private person, a trader, to independently participate in trading on the stock exchange. Small players there are simply not interesting and are not allowed. Therefore, traders make transactions through intermediaries - brokerage firms.

Brokers buy currency on the stock exchange at one price, and then sell it to a trader at another, somewhat higher. The purchase of currency looks absolutely similar in any other exchange office of the bank.Thus, the spread is a payment to brokers for the provision of intermediary services to traders. At the same time, the price of currency for traders is “stretched” (or “smeared” in a big direction).