In theory Bid and Ask prices are set by market participants and reflect those prices at which a willing buyer or seller will make the trade. If a sale goes thru at $10.00, the next closest Bid and Ask become the current Bid and Ask -- that could be $10.00 or $9.95 or $10.05, or whatever prices the next buyer and seller in line are willing to accept that are closest to the last sale completed.
It is not necessary to enter an order at either the Bid or the Ask price (a market order). Any participant can enter his order at whatever price he chooses either above or below the current Bid or Ask (a limit order). When one enters a market order to buy or sell, it will get filled at whatever is the current Bid/Ask, however when one enters a limit order it will not be filled unless/until another participant is willing to accept that price and do the trade.
Now, this all gets further complicated by the fact that the Market Maker trades for his own account, and he can enter any Bid or Ask he wishes. For example, I sometimes find an MM will play games. Let's say the last sale went through at $10 and the next Ask in line is $10.05 and the Bid is $9.95. I enter a Limit Bid of $10, and immediately see a whole lot of $10 Bids jump ahead of mine in line. That is the MM playing games. When he sees my bid he figures if someone is willing to sell for $10, he wants them to sell to him and not to me, so he jumps his orders to the front of the line. He can do the same thing on the sell side.
There are many other ways in which an MM can play games, this is just one of them. Bottomline, a trader needs to assess at what price he is willing to do the trade, regardless of what the Current Bid or Ask or last filled order price may be, and enter his Limit Order at that price.
Newly
News 
Market Data 
Discover 
