Q:

When a floor broker asks a specialist, “How’s PDQ?” The specialist replies “59.20 to 35; 6 by 11.”  If the specialist trades to narrow the spread, what is the lowest bid that the specialist may enter?
a) 59.19
b) 59.34
c) 59.36
d) 59.21

A:
The correct answer is d)
When the specialist gave the floor broker the quote of “59.20 to 35; 6 by 11,”  the quote meant that the highest bid on the specialist’s book was 59.20 and the lowest ask on the book was 59.35 (the 6 by 11 means that there were 6 round lots at 59.20 and 11 round lots at 59.35).  When a specialist trades for its own account to narrow the spread, it must bid at least .01 higher than the highest bid and ask at least .01 lower than the public orders on the book—the specialist may compete with public orders.  The lowest that the specialist may ask in this case is 59.34.  The effect of a specialist’s narrowing the spread is said to be “trading between the bid and the ask.”

MORE FAQS

  1. Who employs the specialists at New York Stock Exchange (NYSE)? Do they work for themselves, for the NYSE or for brokerage firms?

  2. What's the difference between a Nasdaq market maker and a NYSE specialist?

  3. What's the average salary of a human resources (HR) specialist?

  4. What do the bid and ask prices represent on a stock quote?

  5. Why are the bid prices of T-bills higher than the ask prices? Aren't bids supposed to be lower than ask prices?

  6. What do the numbers that follow the bid and ask numbers in stock quotes represent?

  7. What does the variance between the bid and ask price of a stock mean?

  8. Which of the following equity trades would appear on the ticker ...

  9. What kind of assets can be traded on a secondary market?

  10. How do financial advisors execute trades?

  11. What is the difference between an options contract and a futures contract?

  12. I don't understand how a stock has a trading price of 5.97, but when I buy it I have to pay the asking price of 6.04. How can I be paying more than what the stock is trading for?

  13. What types of stocks have a large difference between bid and ask prices?

  14. What are the differences between AMEX and Nasdaq?

  15. What does it mean when people say they "beat the market"? How do they know they have done so?

  16. When is a buy limit order executed?

  17. If a foreign currency dealer is quoting a bid-ask spread of $1.0500-35 ...

  18. There are so many stockbrokers out there. How do I go about choosing the best one for me?

  19. Compute the offering price for a mutual fund with NAV of $1,200,000,000, an 8% front-end load, and 1,000,000 shares outstanding.

  20. What types of stocks have a small difference between bid and ask prices?

RELATED FAQS

  1. Who employs the specialists at New York Stock Exchange (NYSE)? Do they work for themselves, ...

    Before we address this question, let's review what specialists do. Specialists are people on the trading floor of an exchange, ...
  2. What's the difference between a Nasdaq market maker and a NYSE specialist?

    What's the main difference between a specialist and a market maker? Not much. Both the New York Stock Exchange (NYSE) specialist ...
  3. What's the average salary of a human resources (HR) specialist?

    Discover the national average salary for a human resources (HR) specialist in the as well as for regions throughout the United ...
  4. What do the bid and ask prices represent on a stock quote?

    Learn what the bid and ask prices mean in a stock quote. Find out what represents supply and demand in the stock market and ...
  5. Why are the bid prices of T-bills higher than the ask prices? Aren't bids supposed ...

    Yes, you are correct that the ask price of a security should typically be higher than the bid price. This is because people ...
  6. What do the numbers that follow the bid and ask numbers in stock quotes represent? ...

    When looking at stock quotes, there are numbers following the bid and ask prices for a particular stock. These numbers usually ...
RELATED TERMS
  1. Write Out

    A dual trade transaction enacted by a specialist in an individual ...
  2. Specialist Unit

    A group of firms or individuals that act as a market maker for ...
  3. Stopped Order

    A market order on the NYSE that is stopped from being executed ...
  4. Negative Obligation

    An obligation of NYSE specialists to remain on the sidelines ...
  5. Limit Order Book

    A record of unexecuted limit orders maintained by the specialist. ...
  6. Public Book (Of Orders)

    A book containing all of the buy and sell orders for a specific ...
Hot Definitions
  1. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  2. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  4. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
Trading Center