medium · Market Microstructure spread-econ
A limit order book shows 500 shares at the best bid of 20.00. A trader places a new limit buy order for 1,000 shares at20.01.
What is the most immediate MICROSTRUCTURE effect of this order?
- The order triggers an immediate execution with the existing bid.
- The order 'penny jumps' the queue and narrows the quoted spread.
- The order increases the depth at the 20.00 level.
- The order creates an immediate permanent price impact of $0.01.
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