Q:
A market maker in the stock ABCD has filled a portfolio over time with prices as low as $2 per share and as high as $10 per share. The average cost is about $5 per share. The current quote for the stock is 4 to 4 ¼. According to NASD, the dealer should offer the shares to the public at:

A. $2
B. $10
C. $4
D. $5

A:
C is closest. Mark-up rules of fair practice on Nasdaq require market pricing.
The NASD views markups in excess of 5% above the prevailing market price to be a violation of the requirements that a broker-dealer comply with the basic principles of fair and equitable trade. There are unique circumstances where the relevant facts justify a markup/down of over 5%. Such markups/downs should require Compliance Department approval prior to such charges being made.
Have a Financial Question?

MORE FAQS

  1. A person purchases stock XYZ (an Over The Counter stock) from a company who is also the market maker ...

  2. What's the difference between profit margin and markup?

  3. What is the difference between markup and gross margin?

  4. Do I need to be a U.S. citizen to sit for any NASD examinations?

  5. What is the difference between gross profit margin and markup?

  6. Do I have to reach a certain age before I can write an NASD exam?

  7. A registered representative has discovered an article in a major news magazine that makes statements ...

  8. My job with a member firm has recently been terminated and I do not want to write all of my securities exams again. How do I prevent my licenses from expiring?

  9. Which of the following, under the NASD Conduct Rules, would constitute a complaint ...

  10. Ben is employed by the underwriter of the PCO mutual fund ...

  11. How are a mutual fund's C shares different from A and B shares?

  12. When a broker-dealer has decided to provide its registered representatives with reprints from a magazine ...

  13. Bob is a registered representative who recently left ABC Securities and has now registered with PDG ...

  14. The real rate of return is the amount of interest earned over and above the:

  15. A “normal market” is also called a (an): A) Inverted market b) Carrying charge market c) Premium market ...

  16. Are dividends the best way to make money for retirement?

  17. How many attempts at each CFA exam is a candidate permitted?

  18. What's the average salary of a financial advisor?

  19. Why is Hong Kong considered a tax haven?

RELATED FAQS

  1. 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 ...
  2. What's the difference between profit margin and markup?

    Learn to differentiate between profit margin and markup, two accounting terms that are often used interchangeably but actually ...
  3. What is the difference between markup and gross margin?

    Read more about the key differences between a company's gross margin and its pricing markup, two rough indicators of business ...
  4. Do I need to be a U.S. citizen to sit for any NASD examinations?

    No. The National Association of Securities Dealers (NASD) does not require a candidate to be a U.S. citizen to sit for an ...
  5. What is the difference between gross profit margin and markup?

    Understand the distinction between gross profit margin and markup, and learn how each of these measures of profitability ...
  6. Do I have to reach a certain age before I can write an NASD exam?

    The National Association of Securities Dealers (NASD) does not stipulate that individuals must be a minimum age to write ...
RELATED TERMS
  1. NASD Rule 2790

    A ruling passed by the National Association of Dealers (NASD), ...
  2. Markup

    The difference between an investment's lowest current offering ...
  3. Markdown

    The difference between the highest current bid price among dealers ...
  4. Trade Reporting And Compliance Engine - TRACE

    A program developed by the National Association of Securities ...
  5. Variable Cost-Plus Pricing

    A pricing method in which the selling price is established by ...
  6. National Association Of Securities Dealers - NASD

    The NASD was a self-regulatory organization of the securities ...
Hot Definitions
  1. Nonfarm Payroll

    A statistic researched, recorded and reported by the U.S. Bureau of Labor Statistics intended to represent the total number ...
  2. Conflict Theory

    A theory propounded by Karl Marx that claims society is in a state of perpetual conflict due to competition for limited resources. ...
  3. Inflation-Linked Savings Bonds (I Bonds)

    U.S. government-issued debt securities similar to regular savings bonds, except they offer an investor inflationary protection, ...
  4. Peak Globalization

    Peak globalization is a theoretical point at which the trend towards more integrated world economies reverses or halts.
  5. Phishing

    A method of identity theft carried out through the creation of a website that seems to represent a legitimate company. The ...
  6. Insurance

    A contract (policy) in which an individual or entity receives financial protection or reimbursement against losses from an ...
Trading Center