The process of filling (or executing) an order at a better price than the best market bid and offer (e.g., the National Best Bid and Offer– NBBO). Market makers usually provide price improvement on specific orders (particularly, limit orders and market orders).
For a buy order, price improvement means the order will be filled at a lower price than the best bid and offer, while for a sell order, it means the order will be filled at a higher price than the best bid and offer. A trader (like a specialist) would step in to offer a better price for an incoming order, usually when the bid-offer spread is wide and the order is small.
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