Why do spreads widen right before scheduled news?
A stock normally trades a -cent spread. In the final minutes before its scheduled earnings release, the spread widens to cents, and at the instant of the announcement many quotes vanish entirely.
Explain the mechanics. Why does the spread blow out, and why do market makers pull quotes at the release?
Show a hint
A market maker's spread compensates for adverse selection and inventory risk. Ask what a scheduled, discrete information event does to each of those.
Your answer
This one is open-ended. Work it through, then check your reasoning against the full solution.