Term · Liquidity & Trading
Lit Market
In briefA lit market is a trading venue with full pre-trade transparency, where orders with price and volume are visible in the public order book. It stands in contrast to dark pools and contributes substantially to public price formation, which shapes price reliability for small caps.
Definition
A lit market is a trading venue with full pre-trade transparency, where buy and sell orders with prices and volumes are visible in the public order book. It stands in contrast to dark pools without pre-trade transparency. Regulated markets and many multilateral trading facilities in the EU operate under the MiFID II transparency regime.
Why it matters for small caps
For small caps, the lit market contributes to public price formation, so its share of total trading influences the reliability of the reported price.
Common misreadings
- Lit markets are equated with all exchange trading, even though part of the volume runs non-transparently through dark venues.
In the process
Frequently asked
How does a lit market differ from a dark pool?
The lit market displays orders publicly before trading, the dark pool does not; pre-trade transparency therefore arises only on the lit market.
What regulation applies in the EU?
The pre-trade transparency of regulated markets and trading facilities is governed by the MiFID II regime.
Why is the lit share relevant?
The higher the transparently traded share, the more reliable public price formation is.
Related terms
Sources
Primary
Education only, not investment advice. Ranges and thresholds are didactic orientation values, not an official standard.