Order routing and market makers

S

shark

I'm trying to understand how order routing actually works on exchanges. Can any of you correct me in what I think I know so far:

-The bid-ask spread is the price at which you can sell/buy instantly to/from a market maker. On highly liquid securities there are several market makers competing with each other. if the spread is wide enough, it's possible to flip the security by buying just over the bid and selling just under the ask.

-The order que goes completely by price, so I can only sell something if my price is the lowest for a split second.

-The opening price is an estimate of equilibrium made by the specialist/market maker. It is in the best interest of a market maker to find equilibrium in price, as they profit depending on how many orders they go through.

Anything else I need to know? Thanks.
 
Quote from shark:

-The bid-ask spread is the price at which you can sell/buy instantly to/from a market maker.
... doesn't always have to be from a market maker; for example, could be from another daytrader who happens to have their limit order at the level of the best bid/offer

-The order queue goes completely by price, so I can only sell something if my price is the lowest for a split second.
... order queue also goes by time; i.e. at the best price, the orders are also ranked by time precedence, first in first out, so the first limit orders submitted at that price are the first ones executed.

-The opening price is an estimate of equilibrium made by the specialist/market maker.
... will depend on which market you are concerned with, but in most markets it is not an estimate; it is the price that clears the opening auction; no estimate is involved.
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