A lit market publicly displays buy and sell quotations before trades occur. Its visible prices and quantities help traders compare immediate trading opportunities and decide whether to take an available quote or submit a competing order. For a quant, this is useful information about the current market state, but it is not a guarantee of the price or quantity a later order will obtain.
“Lit” describes pre-trade transparency. The contrasting term dark pool refers to matching without public display of resting interest. Neither label, by itself, specifies every order type a venue permits.
Reading the lighted part of the book
Suppose a fictional stock has the following displayed top of an order book at one venue:
| Side | Price, USD/share | Displayed quantity, shares |
|---|---|---|
| Best bid: highest displayed buying price | 99 | 200 |
| Best ask: lowest displayed selling price | 101 | 150 |
The bid–ask spread is USD 2 per share. The midprice is USD 100 per share:
Original synthetic quote from one venue. Filled markers identify displayed prices; the hollow midpoint marker is a reference, not a resting order or promised fill.
The ask tells a prospective buyer where displayed selling interest currently begins; the bid gives the corresponding information to a prospective seller. The midpoint is a calculation between them. Nothing in this snapshot says that anyone is offering to trade at USD 100.
Likewise, the 150 displayed ask shares are not a reservation for the next person who sees the quote. Other orders can consume them, and orders can be amended or cancelled before a new order arrives. Additional selling interest may also be hidden or arrive later. Displayed liquidity is therefore neither guaranteed future availability nor a complete inventory of potential supply.
For a larger buy, the top quote alone cannot determine an average execution price: that would require the deeper offers, the quantity actually available on arrival and the applicable matching rules. A visible quote also does not reveal the identity or motive of every trader behind it.
The public Order-book simulator lets you predict market and limit order fills, compare depth settings and advance simulated market events. It provides a practical way to watch a displayed book change; its scenarios are models rather than live venue data.
Three questions that should stay separate
The regulatory examples here concern US equities, checked on 26 October 2026. Other jurisdictions use their own venue categories and disclosure rules.
| Question | Relevant distinction |
|---|---|
| What can others see before a trade? | Displayed quotations versus non-displayed interest. |
| Under what legal framework does the venue operate? | For example, a registered exchange versus an alternative trading system. |
| What is disseminated after a trade? | Transaction reports, including publication on the applicable trade tape. |
FINRA describes traditional exchanges as lit markets because quotation information is public. It also explains that listed-stock trades on exchanges and ATSs, including dark pools, are reported and published on the consolidated tape. A public trade print is post-trade information; it does not prove that the order was visible beforehand.
Exchange trading need not make every resting share visible. Nasdaq Equity 4, Rule 4702(b)(3) describes non-displayed orders, while Rule 4703(h) permits displayed orders with reserve size replenished from additional non-displayed size. Lit quotations and undisplayed interest can coexist on the same exchange venue.
Conversely, ATS status does not itself require darkness. Regulation ATS Rule 301(b)(3) explicitly addresses displayed subscriber orders and sets display and access requirements when its conditions apply. Check a venue's actual rules rather than inferring its information policy from its legal label.
In execution research, preserve this distinction in the data: a quotation records displayed interest at a timestamp; a transaction records an execution. Combining them carefully can help measure execution costs. Treating either as a complete picture of what was available to your order can produce a misleading result.
Sources
- FINRA: Where Do Stocks Trade?, updated 17 July 2024; accessed 26 October 2026. Pre-trade quotations and post-trade publication in US equities.
- Nasdaq Equity 4, Rules 4702(b)(3) and 4703(h), accessed 26 October 2026. Non-displayed orders and reserve size on an exchange book.
- eCFR: 17 CFR 242.301, paragraph (b)(3), accessed 26 October 2026; displayed Title 17 currency date 22 October 2026. Display and access requirements for qualifying ATSs.
- Rishi K. Narang, Inside the Black Box: A Simple Guide to Quantitative and High-Frequency Trading, 2nd edition, Wiley, 2013, Chapter 7, pp. 127–128. Quote visibility and routing context; current US venue and reporting distinctions are checked against the official sources above.