easy · Market Microstructure spread-econ
In the Lee-Ready algorithm, if a trade occurs at the current quote midpoint, what is the next step to classify the trade direction?
- Classify the trade as neutral and exclude it from effective spread calculations.
- Apply the Tick Test based on the direction of the most recent price change.
- Wait for the next quote update to determine the trade's relationship to the new midpoint.
- Classify it as buyer-initiated if the previous trade was seller-initiated.
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