When a floor broker asks a specialist, “How’s PDQ?” ...

By Investopedia Staff AAA
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. The popular trading system "Instinet" is situated in which of the following markets ...

    Free info on financial certification exams including study guides, exam questions, and much more!
  2. A person purchases stock XYZ (an Over The Counter stock) from a company who is also ...

    The correct answer is c When the firm is a market maker in the stock then it must act as a principle. Principal is the main ...
  3. An individual made a lump-sum deposit into a variable annuity of $25,000 ...

    The correct answer is c). Early withdrawal from a non-qualified annuity--prior to age 59½, except for death or disability, ...
  4. A church that a registered representative (RR) attends plans to raise the funds necessary ...

    The correct answer is c) Although church bonds are normally considered to be exempt securities, the RR is obligated, by NASD ...
RELATED TERMS
  1. Series 79

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

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

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

    One who provides financial advice or guidance to customers for ...
  5. Series 23

    An exam offered by the Financial Industry Regulatory Authority ...
  6. Series 28

    An exam given by the Financial Industry Regulatory Authority ...

You May Also Like

Related Articles
  1. Professionals

    Should You Add A Securities License ...

Trading Center