What Is No Quote?
No quote refers to a stock or other security that is inactive or not currently being traded, and so no current two-sided market readily exists. A no quote stock therefore does not have a current bid or ask price.
No quote stocks may be infrequently traded and thus difficult to buy or sell, making them illiquid. When the stock is eventually traded, it may have a very wide spread between the bid and ask price relative to that of an active stock.
- A no quote occurs when a security is inactive or illiquid and thus has no current bids or offers to quote.
- No quotes tend to occur on small OTC stocks that do not have designated market makers providing liquidity.
- A no quote is not to be confused with a grey market or dark pool. Grey and dark markets may have bids and offers, they just cannot be seen.
How a No Quote Works
Listed stocks are required to have designated market makers available to provide bid and ask volume on each side of the market available for purchase or sale, either on an on-going basis or whenever there is an explicit request for a quote (RFQ).
Some securities, however, do not have any market makers. For instance, they may trade over the counter (OTC) or have been de-listed from an exchange. When a security has no active market makers, or a lack of available buyers and sellers, there is nobody to quote the market and so the security is a no quote.
A no quote stock would thus be considered highly illiquid. Illiquid securities come with higher risk because with few buyers or sellers, it may be difficult to get into or out of the security at the price desired. Most securities traded on major exchanges are liquid and can be bought and sold at any time during trading hours.
A very small company would be more likely to have no quote on their shares than a nationally recognized and established blue chip company.
If you are the holder of a no quote security and would like to dispose of it, you may need to enlist the aid of a broker who is able to solicit bids from potential market participants. These parties may be hedge funds, investment banks, or other institutional clients who do not mind the lack of liquidity and are willing to buy the security at a discount to make it worthwhile for them. The holder could also post their offer in the market and leave it there. By posting a limit order to sell, it may attract a buyer who sees the offer to sell and seizes the opportunity.
In some cases, no buyer can be found at all, in which case the owner of the no quote security has no choice but to keep holding on to the security, or write it off as a loss with a market value implicitly of zero.
Grey Market and Dark Pools
Some stocks trade in a grey market. This means there are buyers and sellers, but they can't see each other's bids and offers. A price chart or time and sales will reveal that transactions are occurring. In this type of market, traders will typically probe for liquidity with limit orders, so they only transact within a specified price range.
This is different than dark pools which are private exchanges, operating on publicly traded stocks, that execute trades without showing the orders on a public order book or Level II. Once a trade occurs, the trade is shown on the time and sales.
Example of a No Quote Stock
In order for a stock to regularly have no quote, it needs to have virtually no interest in it, and therefore, it is unlikely to remain listed on a major exchange for long. Therefore, most people are unlikely to come across a no quote stock unless they are looking at very small and obscure OTC stocks.
To get a feel for what a no quote stock may look like, look at the Level II of a small listed company after the stock exchange officially closes, or before the stock market officially opens. A stock that typically trades at $20 or $50 during market hours may have no bids or offers after-hours or in the pre-market. In this case, the stock may actually have a bid price of zero, or will simply show nothing, and same with the offer. As the open approaches, bids and offers start coming in, providing a quote for the stock.