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Lit market

A venue whose resting orders are publicly displayed before they trade, as opposed to dark venues where interest is hidden until execution.

Lit venues do the price discovery. Their displayed quotes feed the nbbo, anchor the midpoint-peg used by dark venues, and give everyone a reference price.

This is why market-structure debates focus on the lit share of volume: dark trading free-rides on lit price formation, and if too much flow goes dark, the reference price gets noisier for everyone.

Example: a stock trades 40% off-exchange. The dark-pool and internalisation prints that make up that 40% are all priced from the lit bid and ask of the other 60%. Remove the lit orders and there is no midpoint left to cross at.

Related: exchange, dark-pool, off-exchange-trading, nbbo

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