Question of the Week

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


Answer: 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.
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