Volatility & advanced strategies
How do high-frequency market-making algorithms update quote spreads during extreme macro announcements?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
High-frequency market makers widen quoted bid-ask spreads and reduce displayed size within milliseconds of major economic releases to limit adverse selection risk from faster-reacting informed order flow.
How it works
Algorithms monitor scheduled news feeds and pull or widen quotes just before releases like FOMC or CPI, then rapidly recalibrate spreads once initial volatility settles, per SEC market structure research.
An example
During an FOMC rate announcement, options market makers can widen SPX option spreads several-fold for seconds to minutes before narrowing as price discovery completes.
Risk & limitations
Retail orders submitted during these windows can receive unexpectedly poor fills; checking spread width before submitting market orders around scheduled news events is prudent.
Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.