Abstract
This paper develops a real-time structure model of price formation, and 
uses it to investigate the dynamics of effective quotes and bid-ask 
spreads between consecutive trades. Several stylized facts are 
established regarding the average duration and frequency for clustering 
trades, reversing trades, upticks, and downticks. There is weak evidence 
that effective bid-ask spread increases over time when no order comes. 
Quotes are found changing over time when no order comes, but not 
monotonously or symmetrically. The dynamics of quotes is related to the 
direction of the last transaction. The findings seem to suggest that 
market makers believe that the clustering trades with middle-range 
duration, i.e. coming one or two minutes after the last trades, more 
likely contain private information, while the reversing trades with same 
duration less likely contain private information.