WHAT IS 'Stub Quote'

A stub quote is an order placed well off a stock’s market price without intending the order to be executed. A stub quote is also referred to as a placeholder quote because no counterparty would agree to such an absurdly priced transaction.


A stub quote is an offer to buy or sell a stock at a price so far off from the prevailing market that it is not meant to be executed. For example, this could mean an order to buy at five cents or an offer to sell at $200,000.

Stub quotes are used by trading firms when the firm doesn't want to trade at a certain price and intends to pull away to ensure no trades occur. In order to make this happen, the firm will offer quotes that are regarded as out of bounds. A stub quote also serves as a safety net to avoid risks. If a market maker doesn't have enough liquidity available to trade a stock near its recent price range, then a stub quote is entered so that the market maker complies with the requirement to maintain a two-sided quotation while at the same time not extending quotes beyond the stock’s available liquidity.

Examples of Stub Quotes

A hypothetical example of a stub quote could be a trading firm setting stub bids at two cents and stub offers at $2,000. Since the quotes are so dramatic, on a normal market trading day, these types of trades are generally not executed.

Typically stub or placeholder quotes would never be reached, however their presence can affect the market on rare occasions. Stub quotes are regarded as one of the causes of the Flash Crash of May 2010 when the Dow Jones Industrial Average dropped nearly 1,000 points because the out of bounds prices of the stub quotes were inadvertently executed when the market dropped dramatically that day.

In the afternoon of May 6, 2010, the Dow Jones Industrial Average was down 300 points for the day. Market equity began to fall rapidly, dropping 600 points in five minutes for a loss of nearly 1,000 points. Twenty minutes later,  the market had regained most of the 600-point drop. A report from the Commodity Futures Trading Commission in 2014 described the Flash Crash of May 2010 as one of the most turbulent periods in the history of financial markets.

In November 2010, the U.S. Securities and Exchange Commission issued new regulations scaling back the use of stub quotes.

  1. Firm Quote

    A firm quote is a bid to buy or offer to sell a security or currency ...
  2. L

    The fifth character added to a stock symbol listed on the Nasdaq ...
  3. Level 3

    A trading service consisting of everything in Level 2, plus the ...
  4. Indicative Quote

    An indicative quote is a forex price provided by a market maker ...
  5. Z

    A Nasdaq stock symbol specifying that the stock is a miscellaneous ...
  6. Stock Quote

    A stock quote is the price of a stock as quoted on an exchange. ...
Related Articles
  1. Tech

    What Caused The Flash Crash?

    Investigators are still trying to figure out what went wrong on May 6, but it seems likely that the crash was caused by multiple interlocking failures.
  2. Insights

    How to Understand a Stock Quote

    Trading stocks is a popular way to invest money. Learn the details of a quote and what its information suggests, including pricing data and charts.
  3. Taxes

    Tips To Make Next Year’s Taxes Less Stressful

    You might be ready to put the stress of tax preparation behind you until next season, but ignoring your personal tax situation for 11 months of the year is what got you into this mess. Find out ...
  4. Trading

    Understanding order execution

    Find out the various ways in which a broker can fill an order, which can affect costs.
  5. Personal Finance

    How Brokers Can Avoid A Market-Maker's Tricks

    Ensure that you and your clients are getting the best deal by avoiding these three pitfalls.
  1. How can I be paying more than what a stock is trading for?

    It might seem logical that the last traded price of a security is the price at which it would currently be trading, but this ... Read Answer >>
  2. Does the closing price have to equal the last price traded?

    Logically and theoretically, the last price traded should be the same as the closing price of a stock. However, the way we ... Read Answer >>
Hot Definitions
  1. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
  2. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  3. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
  4. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent ...
  5. Dividend

    A dividend is a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
  6. Inventory Turnover

    Inventory turnover is a ratio showing how many times a company has sold and replaces inventory over a period.
Trading Center