Here’s something to try: Go to Yahoo Finance during trading hours and enter a ticker symbol for a quote, say, INTC for Intel. On the quote page, click on Order Book. You’ll see, under “Bid,” a list of four or five prices in descending order, and a similar list, arranged lowest to highest, under “Ask.” These represent offers to buy or sell a specified quantity of stock. The prices will be closely spaced, and the top numbers should converge on the current ticker price, reflecting the most recent trade.
So that is the capital markets at work, but it is also, of course, fiction. If you as a retail customer want to buy stock in Intel, your order will most likely be filled at or near the prevailing market price by your brokerage, out of in-house inventory. Or it may be handed off for a small fee to an “internalizer,” who buys and sells in a “dark pool” where quotes aren’t published. Perhaps you’ve heard of Bernard Madoff; in the legitimate part of his business, that’s what he did. Bid and ask quotes are always to the penny, but the prices of executed trades may be carried out to three, four, or even six decimal places. No sane human trader would spend their time haggling over a ten-thousandth of a cent, but computers don’t get bored.
Read More | "Raging Bulls: How Wall Street Got Addicted to Light-Speed Trading" | Jerry Adler | ?Wired