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Let us assume that the bid price is $10 the ask price is $20. We can only buy for $20 and only sell for $10.

Does the current price have to be in the middle? IOW, does it have to be $15? Or can it be $14 or $16 as well?

Who sets bid and ask prices? Do market makers still exist or is everything driven by orders now?

Can the spread change but the price be unaffected? For example, can the current price be $15 as before, the ask changes to $25, and the bid drops below $10? Or is that very unlikely?

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During trading hours there are three numbers (the bid, ask and last price). The NBBO quote (USA) will always be the highest bid and the lowest ask.

The last price quote is always the price of the last trade.

In the absence of aggressive order placement, the market maker sets the price. While it's a bit extreme, let's go with $10 x $20 If buying, you are free to bid $10.01 for the stock and the quote then becomes $10.01 x $20.00.

You are now making the market on the bid side, at least until someone comes in with a higher buy price. The NBBO will fluctuate according to orders placed. If I placed a priced buy order like $19.50, the quote would become $19.50 x $20.00.

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  • thanks that explains a few points. But how does the quote change when a trade happens? If I buy the stock in your example for $20, is the new quote something like $19.50 x $20.01? Also to be clear, if the last price quote is always the price of the last trade, it must be either the ask or the bid price, correct? And I wondered if exchanges are mostly order driven nowadays. Is that true, or do you have still market makers? I am interested in the U.S. mostly. – 4238492849 Jun 20 at 10:50
  • If a trade occurs at the bid or ask, the NBBO quote remains the same if there are other orders on the order book at that price. If not, the price moves to the next order. So if quote is $19.50 x $20.00 and I'm the only one bidding $19.50 them if someone sells to me at $19.50, the next lower bid becomes part of the quote. Say it's you at $18.25. Then the quote becomes $18.25 x $20.00. All markets are order driven. All major exchanges have market makers. If buyers and sellers are more aggressive than the MM then they become the market. – Bob Baerker Jun 20 at 14:34

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