The bid/ask spread for ETFs is the difference between the prices quoted by market makers either OTC or on exchange for a certain transaction size. Intraday bid ask spreads for risk trading are a function of the following factors:
The size of the transaction.
The primary market spread for the ETF
The Market Maker’s confidence in the iNAV computation for the ETF.
The availability of hedges.
The delta hedge risk spread for the hedge selected by the Market Maker.
The Market maker's ETF inventory.
The Market maker's exposure inventory.
The Market maker's risk factor view.