Quick Answer
A firm quote binds the dealer to trade at the stated price for at least the stated size; a subject quote does not. Backing away from a firm quote is a violation. Nominal quotes are informational only and must be clearly labeled as such, and every published quotation must represent a genuine, bona fide bid or offer.
Before an order can be executed, someone has to publish a price. Understanding the different types of quotes (and the obligations they create) is essential for knowing when a dealer can and cannot walk away from a stated price.
What Are the Types of Quotes?
| Quote Type | Meaning | Obligation |
|---|---|---|
| Firm quote | A binding commitment to buy or sell at the stated price for at least the stated size | Must be honored; backing away is a violation |
| Subject quote | Subject to confirmation; not immediately binding | Dealer may change the price before execution |
| Nominal (informational) quote | For informational purposes only; not a genuine offer to trade | Must be clearly identified as nominal |
| Workout quote | Dealer will attempt to negotiate a trade at approximately the indicated price | Common for thinly traded or large-block securities |
| Bid wanted / Offer wanted | Dealer solicits bids (or offers) from the market without committing to a price | Used to test market interest |
Think of it this way: Quote types sit on a spectrum of commitment. A firm quote is a promise you cannot break. A subject quote is more like "I'm probably willing at this price, but let me confirm first." A workout quote is closer to "somewhere in this ballpark." And a nominal quote is just sharing information with no intention to trade at that price.
Exam Tip: Gotchas
- A subject quote gives the dealer room to change the price; a firm quote does not. If the exam describes a quote "subject to confirmation," the dealer is not yet locked in.
- Workout quotes are for difficult-to-trade securities where exact pricing is uncertain. They signal an approximate price, not a commitment.
What Are Firm Quote Obligations?
- A dealer who publishes a firm quote must be willing to buy or sell at the quoted price for at least the published or normal unit of trading
- Backing away (refusing to honor a published firm quote) is a violation of the anti-backing-away rule
- Applies to both exchange-listed and over-the-counter (OTC) securities
- FINRA tracks backing-away incidents and patterns of non-compliance may result in disciplinary action
Exam Tip: Gotchas
- The exam may describe a dealer who refuses to sell at the published ask price when a customer wants to buy. That is "backing away," a violation of the anti-backing-away rule. A firm quote is a binding obligation, not a suggestion.
What Are the Rules for Publishing Quotations?
- No member shall publish or circulate any quotation relating to a security unless the member believes the quotation represents a bona fide bid or offer
- Fictitious or misleading quotations are prohibited
- Published prices must reflect genuine trading interest
Exam Tip: Gotchas
- Nominal quotes must be clearly labeled. Publishing a nominal quote without identifying it as such could mislead the market and violate the bona-fide-publication requirement.
What Should You Check on Exam Day?
- Identify whether a described quote is firm (binding), subject (dealer can revise), nominal (informational only), or a workout (approximate, negotiated).
- Flag any scenario where a dealer refuses to honor a published firm quote as "backing away," a violation.
- Confirm nominal quotes are labeled as such before assuming they are genuine trading offers.