Hey there, folks.
I'm trying to wrap my head around the concept of a Bid-Ask spread and market makers on the stock market. Let's say that the stock for XYZ is trading at 10 / 10.05 bid-ask spread. Does this mean that $10 is the highest that other investors is willing to buy @ and $10.05 is the lowest other investors are willing to sell @? I mean, considering all unfilled orders? Or is this spread set by a market maker / specialist?
I wanted to understand better what happens to an order after it is placed. For example, if I go on and buy 100 shares of ABC at the 10 - 10.05 bid-ask spread. I could either buy it @ market value, in that case, at 10.05 (i) or I could set a limit order for, let's say, 10.02 (ii).
In (i), does another investor like me actually sell these shares or is it a market maker?
Let me summarize what I want to understand:
1) Who sets the bid-ask prices? Are these the unfilled orders of ordinary investors like me or is it a market maker, who is taking a profit in order to provide liquidity?
2) If I buy at the current market price, do I buy it from another investor or from a market maker?
Thank you!
Submitted November 19, 2018 at 03:21AM by gui93 https://ift.tt/2zgblo6
