Reviewed by Aug 27, 2020| Updated on
What is an Aggressor?
Aggressors are traders who extract liquidity from the markets. Instead of bidding for shares, aggressors buy at-market at the current price of the offer. They would often sell rather than give a sale price at the current at-market offer rates. By purchasing available shares or contracts at the current at-market level, aggressors put instantly executable orders.
Many traders are passive, and by joining bids and offers, they bring value to the markets which do not have an immediate completion or execution. Traders may be human in today's electronic markets, or they may be machines running automated algorithmic trading programmes.
Breaking Down Aggressor
Aggressors are reviewing pricing in markets like futures exchanges, which are based on a range of orders at different prices. Bid-ask spread will be set by the best bid-to-buy and best offer-to-sell offer. The difference between those two rates can vary depending on the market conditions prevailing. There may also be a different number of contracts available for purchase or sale.
How Aggressors Impact Market Liquidity
Liquid markets have many benefits, including the ability of investors to cash their investments in an accessible and timely manner. Anything that reduces market liquidity can result in volatility that can drive investors away from a given market. Because of this, some electronic marketplaces now offer traders' fee credits waiting for order fills and adding liquidity to the markets. Essentially, they pay off the passive trading strategy. Conversely, aggressors who reduce cash by taking the best bid or deal right away can be charged extra fees.