Chapter 04 · Section 4.1

Competing Market Maker System

In the Competing Market Maker System, the OBO displays the best prices of the public order book, for instance:

            Close   Last    Bid/Ask      Size       Quote   
Call TCA 
Jan 40      6 3/8   6 3/4   6 1/2 - 7    17x8       .. - ..

Under "quote", the best quotes (bid/ask) entered by the trading crowd (i.e. the market makers) are displayed. Which of the following bid/ask prices is most likely to be seen under "quote" in the above OBO display?

a) 6 3/4 - 7 1/8
No. The ask quote (7 1/8) is higher than the best customer order. If the market makers want to do business, they try to give better quotes than the customers - unless they are all convinced of an imminent price move.
b) 7 1/8 - 7 1/4
c) 6 3/4 - 6 7/8

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