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How Does Competition among Market Makers Reduce the ‘Cost of Immediacy’?

Competition drives market makers to post tighter quotes to win order flow, thus narrowing the spread and lowering the cost of immediacy.
Greeks.Live10.11.25

How Does Competition among Market Makers Reduce the ‘Cost of Immediacy’?

Competition among market makers forces them to post the most attractive quotes possible to capture order flow and execute trades. If one market maker posts a tighter spread, others must match or beat it to remain competitive.

This continuous rivalry drives the best bid and best ask closer together, effectively narrowing the spread and lowering the 'cost of immediacy' for all market participants.

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