What Market Structure Element Allows for the Effective Spread to Be Narrower than the Quoted Spread?

Price improvement is the element that allows the effective spread to be narrower than the quoted spread. This occurs when a market order is executed at a price better than the best bid or ask.

This happens due to competition among market makers or when an order is executed at the mid-point, often facilitated by a smart order router or a broker's internalizer.