Inside Market

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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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