easy · Market Microstructure
Suppose the NBBO for GHI is $100.00 Bid × $100.05 Ask. A market maker observes that they have accumulated an uncomfortably large 'long' inventory of 5,000 shares.
How will they likely 'shade' their quotes to manage this risk?
- Keep quotes the same but increase displayed size
- Raise both the Bid and the Ask prices
- Lower both the Bid and the Ask prices
- Widen the spread to $99.95 Bid × $100.10 Ask
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