DEFINITION of 'Inside Market'

The spread between the highest bid price and lowest ask price among various market makers in a particular security. Typically, price quotes between market makers feature a lower ask and a higher bid than the quotes made to retail investors in the same security. The inside market ensures liquidity in the market.

BREAKING DOWN 'Inside Market'

The inside market works very much like a series of Vegas sports books. If book A accepts an inordinate amount of money on one team, it bets some of that money on the other team, with book B to balance its accounts. This produces stability in the markets, with fewer severe price fluctuations. In a similar manner, the inside market provides price stability to investors.

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RELATED FAQS
  1. What do the bid and ask prices represent on a stock quote?

    Learn what the bid and ask prices mean in a stock quote. Find out what represents supply and demand in the stock market and ... Read Answer >>
  2. Why are the bid prices of T-bills higher than the ask prices? Aren't bids supposed ...

    Yes, you are correct that the ask price of a security should typically be higher than the bid price. This is because people ... Read Answer >>
  3. What is the difference between a quote driven market and an order driven one?

    The difference between these two market systems lies in what is displayed in the market in terms of orders and bid and ask ... Read Answer >>
  4. What types of stocks have a large difference between bid and ask prices?

    Find out which factors influence bid-ask spread width. Learn why some stocks have large spreads between bid and ask prices, ... Read Answer >>
  5. What does the variance between the bid and ask price of a stock mean?

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  6. What do the numbers that follow the bid and ask numbers in stock quotes represent? ...

    When looking at stock quotes, there are numbers following the bid and ask prices for a particular stock. These numbers usually ... Read Answer >>
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