Odd lots, referring to stock transactions that involve quantities of shares that are less than the standard trading unit, typically have a minimal impact on liquidity in the stock market. Liquidity in the market refers to the ease with which assets can be bought or sold without significantly affecting their price. In the case of odd lots, their relatively small size means that they represent only a small portion of overall market activity.

Since odd lots are often executed by individual retail investors rather than institutional investors or market makers, they tend to have less influence on price movements. Institutional investors and market makers typically engage in larger transactions, known as round lots, which can have a more substantial impact on liquidity and price discovery.

However, while odd lots may not directly contribute significantly to market liquidity, they still play a role in providing opportunities for individual investors to participate in the market. Moreover, the aggregate volume of odd-lot transactions can contribute to overall market activity, albeit to a lesser extent compared to larger transactions.

In summary, while odd lots may not have a significant impact on liquidity in the stock market individually, their collective presence adds to the overall market dynamics and provides avenues for retail investors to engage in trading activities.

Odd lots affect liquidity by showing how smaller traders interact with the market. These orders often appear during volatile periods and can reveal areas where retail interest increases. While odd lots don't move prices as much as large block trades, they still help fill gaps in the order book and smooth out execution. Market makers also use odd lot activity to gauge short-term sentiment and adjust spreads when needed. Higher odd lot volume can signal uncertainty or active participation from smaller investors. Even though they aren't displayed in the main quote, modern trading systems still process them quickly, which supports overall liquidity. Their steady flow helps maintain continuous trading and reduces the chance of sharp price swings caused by thin order books.