why do we need spreads?

how i think of it - price is set by limit orders, price movement is caused by marketable orders (limit orders to sell at bid and buy at ask are market orders)
 
Quote from Gordon Gekko:

let's just take the ES, for example...

say the last price was 900. why can't we tell a computer the total number of shares/contracts/whatever. as more (or larger sized) buys come in than sells, the computer calculates it and adjusts the price higher. if nobody wants to buy, then there will be more or larger sells and the computer will adjust the price down. this could be done with 1 price.

p.s. the stock i have right now, BBA.....the bid is 4.55 and the ask is 4.74. the stock has done nothing the last few minutes...and a little while ago the spread was much tighter. is there really a need to make the spread that wide?! no! the last thing we need is some guy (specialist) fiddling with prices. let's get rid of them all and replace them with computers. IF spreads are a must, at least make them computer controlled. not decided arbitrarily by some guy with an agenda.
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offer it at 4.60 and the spread will narrow to .05.

You can eliminate the spread by offering it at 4.55, but I doubt that will last long. If you like tight spreads try bidding 4.73 and see what happens.
 
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