Trading Over The Counter And NASDAQ Securities - Piggybacking A Quote

If an OTC BB security has been quoted by another dealer for a minimum of 30 days, they may simply enter their own quote by piggybacking the current dealer’s quote so long as:

  • The security has been quoted for at least 12 of the last 30 days (Active)
  • There have been no more than four consecutive days without a quote (Active)
  • There is at least one independent market maker quoting the security.

Securities that have been delisted from NASDAQ may be automatically quoted by a dealer on the OTC BB if:

  • The issuer is not in bankruptcy
  • The market maker quoted the security on NASDAQ in the last 30 days
  • The security was quoted for 30 days continuously before being halted
  • The issuer is current with all required SEC filings

If a security being quoted on the OTC BB is the subject of an SEC trading suspension, the market maker should review the information they have in their possession with regard to the issuer to ensure that it is still accurate and that they are still in compliance with SEC Rule 15C2-11. The market maker must obtain updated information if necessary.

NASDAQ Quotes

Most actively traded NASDAQ stocks are quoted by a large number of market makers. As market makers enter their quotes, some will be above or below the best quote known as the inside market. A market maker whose quote is above or below the inside market is said to be away from the market. As the market makers adjust their quotes, the market maker who is publishing the highest bid for the security has their bid displayed at the top of the list and their bid is published as the best bid to anyone with a NASDAQ Level I subscription service or higher. The market maker publishing the lowest offer will have their offer listed at the top of the list and published as the lowest offer to anyone with a NASDAQ Level I subscription service or higher. As a result, the best bid and offer from any two market makers will make up the inside market.

Example:

XYAD         

  Bid Ask
  15.00 15.05

MM 1

14.90

15.10

MM 2

15.00

15.20

MM 3

14.85

15.05

MM 4

14.95

15.15

MM 5

14.98

15.18

Note: Notice how the inside market for XYAD consists of the bid from market maker 2 and the offer from market maker 3. All of the other market makers are away from the market. There are also additional terms used to describe the inside market they are:

  • NBBO, national best bid and offer, made up from all quotes from all market participants
  • NASDAQ Inside, the best bid and offer entered by NASDAQ market participants through NASDAQ Market Center Execution System
  • NASDAQ BBO, The best bid and offer entered through the NASDAQ Market Center Execution System excluding quotes from regional exchanges
Locked And Crossed Markets


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