Securities Trader Representative (Series 57) Practice Exam

If the inside market for a Nasdaq Global Market Select stock is 21.15 - 21.35, at what price is the market maker able to buy stock without filling a customer limit order at 21.14?

1. 21.10

2. 21.15

3. 21.20

4. 21.35

The correct answer is: 21.15

The market maker can buy stock without filling a customer limit order at 21.14 by purchasing at a price that is equal to or lower than the best bid in the inside market. In this case, the inside market quotes are 21.15 (the highest bid) and 21.35 (the lowest ask). Since a limit order at 21.14 cannot be filled at a higher price, the market maker can only fill it at 21.15 or below. Therefore, the correct answer is 21.15, as it is the highest price they can pay without executing the limit order to buy at 21.14, ensuring the customer order remains unfilled. In this context, buying at any price higher than 21.15 would directly fill the limit order at 21.14, which is something the market maker is trying to avoid. Thus, 21.15 allows the market maker to adhere to the limitation of not executing the order.