📄️ Liquidity Models
Price discovery is the process of determining the proper price of an asset or security. Developing appropriate and efficient liquidity models to discover prices is crucial to well-functioning markets. While there is no all-around best liquidity model, some are better for specific purposes (e.g. there are reasons stocks are not bought and sold in auctions).
Payment-for-order-flow (PFOF) refers to market makers paying brokerage firms for their order flow. In other words, brokerages monetize their orders because of the inherent value in retail order flow.
📄️ Price Improvement
Price improvement happens when an order is executed at a better price than the best available pubic market price, known as the National Best Bid and Offer (NBBO).