easy · Market Microstructure lob
A stock is quoted at $50.00 bid x $50.10 ask. A buyer submits a limit order to buy 1,000 shares at $50.05.
How does this action affect the displayed market quality?
- It has no effect because the order is not yet executed.
- It widens the effective spread for other buyers.
- It narrows the quoted spread and increases bid-side depth.
- It increases the adverse selection risk for the buyer.
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