What is backwardation?
In an Equities environment a backwardation is when the displayed Bid price (selling price) is higher than the Offer price (buying price).
Order Book stock prices will be displayed in backwardation during the pre and post market auction period until the uncrossing price is determined. Additionally, if an Order Book stock moves by more than 10% intraday, this will also trigger a short auction period again until the uncrossing price is determined.
On quote driven stocks Market Counterparties are NOT obliged to match their screen price until the stock comes out of the backwardation.