R30 - Q16 (EOC)

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June06

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A market: very deep and low bid-ask
B market: Not deep and high bid-ask
EOC Q16: Which market liquidity-motivated and information-motivated traders would prefer?
My thought: All kinds of traders (information-motivated, value-motivated, liquidity-motivated, pass trader) will prefer deep and low bid-ask market.
Is my understanding correct?
 
To me, the liquidity-motivated trader cares very much about liquidity (bid-ask spread) so he needs a low bid-ask and a deep market (Market A).
The information-motivated trader, doesnt care about the liquidity and just needs to trade as soon as possible (i.e. at any cost). So while both would obviously prefer a lower bid-ask spread, I think if you had to match one type of trader with either Market, then market B could also work for this type of trader but it certainly wouldnt work for the liquidity-motivated trader.
 
Thanks, market B works for which kinds of trader?
 
No investor will choose low quality market if he had choice to pick high quality one.
 
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