What is the meaning of “market size” when dealing?
When shares are traded, the prices are formed either on an “order driven” basis (where brokers and market participants enter orders which are immediately matched) or a “quote driven” basis, where market makers quote a bid price and offer price at which they will deal with brokers. These prices, however, are only up to a certain number of shares – the “normal market size” – since some shares are much more liquid (easily traded) than others, and indeed some companies are significantly larger than others. Usually the market size is based on the shares’ past liquidity. As an investor this is something to bear in mind when dealing in smaller companies – for example, if the market size of the shares is 5000 and you wish to buy 20000, you may find yourself paying a higher price when you come to buy the shares to reflect the extra risk the market maker is taking on – conversely you may receive a slightly lower price when selling.
