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.”

RELATED FAQS

  1. Is a financial advisor required to have a degree?

    Discover the minimum educational requirements and financial licenses needed to become a financial advisor in the modern corporate ...
  2. If I have only a limited amount of time to study for the Series 6, what should I ...

    Learn what to focus on when studying for the Series 6 while reviewing important aspects of the exam, including its content ...
  3. What role does the 'chip cycle' play in the electronics sector?

    Read about some of the best and most popular test prep classes for the Series 6 FINRA securities licensing exam, including ...
  4. What does passing the Series 6 enable me to do?

    Learn more about the Series 6, what the examination and license are and what the license enables an individual to buy, sell ...
RELATED TERMS
  1. Series 6

    A securities license entitling the holder to register as a limited ...
  2. Series 79

    A examination to ensure a candidate is qualified to become a ...
  3. Research Analyst

    A person who prepares investigative reports on equity securities. ...
  4. Series 34

    An exam required for individuals seeking to engage in off-exchange ...
  5. Financial Advisor

    One who provides financial advice or guidance to customers for ...
  6. Series 28

    An exam given by the Financial Industry Regulatory Authority ...
Hot Definitions
  1. Short Selling

    Short selling is the sale of a security that is not owned by the seller, or that the seller has borrowed. Short selling is ...
  2. Harry Potter Stock Index

    A collection of stocks from companies related to the "Harry Potter" series franchise. Created by StockPickr, this index seeks ...
  3. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  4. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  5. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  6. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
Trading Center