Broker

Most retail clients trade with an exchange via a broker. Some brokers whom you might be familiar with include Charles Schwab, Robinhood, Etrade, Fidelity, etc. These brokers provide a friendly user interface for retail users to place trades and view market data.

Institutional client

Institutional clients trade in large volumes using specialized trading software. Different institutional clients operate with different requirements. For example, pension funds aim for a stable income. They trade infrequently, but when they do trade, the volume is large. They need features like order splitting to minimize the market impact [7] of their sizable orders. Some hedge funds specialize in market making and earn income via commission rebates. They need low latency trading abilities, so obviously they cannot simply view market data on a web page or a mobile app, as retail clients do.

Limit order

A limit order is a buy or sell order with a fixed price. It might not find a match immediately, or it might just be partially matched.

Market order

A market order doesn’t specify a price. It is executed at the prevailing market price immediately. A market order sacrifices cost in order to guarantee execution. It is useful in certain fast-moving market conditions.

Market data levels

The US stock market has three tiers of price quotes: L1 (level 1), L2, and L3. L1 market data contains the best bid price, ask price, and quantities (Figure 2). Bid price refers to the highest price a buyer is willing to pay for a stock. Ask price refers to the lowest price a seller is willing to sell the stock.