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
b) 7 1/8 - 7 1/4
c) 6 3/4 - 6 7/8
Normally, the quotes entered by the trading crowd should be better than the public orders, simply because the market makers would not do any business if they did not enter better quotes than the public.
At the same time, a quote that can be matched with a limit order in the book is not going to stay on the display: it will be matched and disappear.