How Does Competition among Liquidity Providers Benefit the Trader Requesting a Quote?

Competition forces liquidity providers to offer tighter bid-ask spreads. This reduction in the spread directly lowers the transaction cost for the trader.

Tighter spreads mean the trader buys at a lower price or sells at a higher price than they otherwise would. This is especially critical in high-frequency trading and large-volume derivatives markets.

Ultimately, it improves the execution quality and overall profitability of the trade.