Midpoint Price
The average of the best bid and best ask prices, representing a neutral reference price between buyer and seller.
What is Midpoint Price?
The midpoint price is calculated as the arithmetic average of the national best bid (highest buy price) and national best offer (lowest sell price) at any given moment: Midpoint = (Bid + Ask) / 2. It represents the theoretical fair price between buyers and sellers, with no spread cost to either side. The midpoint is widely used in algorithmic trading, dark pools, and crossing networks where institutional investors seek to trade without paying the full bid-ask spread. Midpoint orders—a standard order type on many venues—instruct the broker to execute at the real-time midpoint, splitting the spread equally between buyer and seller. For large institutional trades, executing at or near the midpoint over time (through VWAP or TWAP strategies) is considered superior to repeatedly taking the full spread. The midpoint is also used as a benchmark for measuring execution quality.
Example
Microsoft is quoted at $420.00 bid / $420.10 ask. The midpoint is $420.05. A large asset manager instructs its algo to route the order to a dark pool with midpoint pricing. If a matching seller is found, both sides trade at $420.05—the buyer saves $0.05/share versus paying the $420.10 ask, and the seller gains $0.05/share versus accepting the $420.00 bid.
Source: SEC — Equity Market Structure