What Is Nominal Quotation?

A nominal quotation is a hypothetical price at which a share of stock or some other security might trade. The opposite of a nominal quotation is a firm quotation, which represents a binding 🅷offer to trade at a specif♊ic price.

Understanding Nominal Quotation

Nominal quotations are provided by 澳洲幸运5官方开奖结果体彩网:market makers to help traders estimate the value of a proposed transaction before making a decisioꦛn. They do ﷽not represent actual offers to buy or sell the security. To avoid confusion, the symbols in nominal quotations are preceded with the prefixes FYI (For Your Information) or FVO (For Valuation Only).

The exact method for calculating nominal quotations differs depending on the market maker. Generඣally, market makers produce n𝔉ominal quotations by referencing historical and theoretical pricing in that security,

Nominal quotations are intended to allow traders to estimate the value of an asset before initiating a trade. They are commonly used in the 澳洲幸运5官方开奖结果体彩网:derivatives markets, including the futures, options, and 澳洲幸运5官方开奖结果体彩网:foreign exchange (forex) markets. In different markets, nominal quotations may 𒈔be referred to as nominal quotes or nominal prices.

The opposite of a nominal quotation is a 澳洲幸运5官方开奖结果体彩网:firm quote, which is an actual offer to buy or sell a security. Firm quotes are not subject to cancellation. In fact, the 澳洲幸运5官方开奖结果体彩网:Securities and Exchange Commission (SEC) punishes market makers who fail to abide by firm offers, an offense 🎃known as backing away from a transaction.𓃲

Nominal quotations are especially important for traders who buy on margin. In margin trading, an investor borrows money from a 澳洲幸运5官方开奖结果体彩网:brokerage provider in ord🎀er to buy a larger quantity of the security. The collateral for the borrowed money consists of the assets purchased on m꧟argin in addition to the trader's own cash reserves.

Both the margin trader and the brokerage firm have a strong incentive to closely monitor the value of the 澳洲幸运5官方开奖结果体彩网:collateral in a margin trader's account. So, brokerage firms supply nominal quotations fo♒r the assets in the account, permitting their value to be tracked.

Nominal Quotation Examples

• Foreign exchange traders use a type of nominal quotation known as an 澳洲幸运5官方开奖结果体彩网:indicative quote. This is a type of non-binding currency quote, provided by a market maker to a 澳洲幸运5官方开奖结果体彩网:counterparty. When a market maker offers an indicative quote to a trader, the market maker is not obligated to trade the given currency pair at the price or the quantity stated in the quote. If a trader or client requests a quote for a currency pair but does not specify the amount for trading, or if there is some doubt as to the market maker's ability to transact the currency pair at the bid or ask quoted, the market maker will issue an indicative quote.
• 澳洲幸运5官方开奖结果体彩网:Municipal bond traders use what is called a 澳洲幸运5官方开奖结果体彩网:workable indication to estimate the price and supply of a particular bond issue. The workable indication is another type of nominal quotation. That is, it permits a trader to tentatively agree to the terms of the workable indication while maintaining the right to revise the order for a specified period of time. By contrast, a firm quotation is immediately binding.