Understanding Price Impact and Market Liquidity

Market microstructure provides insights into how trading mechanisms and market design affect the price formation process and the efficiency of the market. A key concept in market microstructure is the role of liquidity providers and the impact of different trading venues on the execution quality.

Consider the following scenario: A trader is analyzing the execution quality across different exchanges for a highly liquid stock. The trader notes that while executing a large order, the same stock consistently experiences varying levels of price impact depending on the market venue used for execution. Understanding the concepts of price impact and market depth is essential.

Which of the following statements about price impact and liquidity across different market venues is most accurate?