Explain what market fragmentation is and why it matters

Fragmentation arises when the same security trades on many venues at once: exchanges, alternative trading systems, dark pools and dealer internalisation. Competition among venues lowers fees and narrows spreads, but it spreads liquidity thinly, so the best available price and depth at any one venue may be small. Traders therefore rely on smart order routers and algorithms to search venues and to split orders, and regulators rely on consolidated data and best execution rules to link markets. Arbitrageurs keep prices aligned across venues, while slower traders risk getting stale prices. For a large institutional order, fragmentation increases the importance of routing choices and dark pool access. A trap is assuming the displayed quote at one venue reflects total available liquidity.