What is the definition of the minimum quotation spread in securities trading?

• A. The maximum range between bid and ask prices
• B. The minimum acceptable range between bid and ask prices
• C. The fixed price difference between all securities
• D. The average bid and ask range established by regulatory bodies

Answer: (B)

The minimum quotation spread in securities trading refers to the minimum acceptable range between bid and ask prices. This concept is essential in trading as it dictates the smallest gap that can exist between what buyers are willing to pay (the bid) and what sellers are asking for (the ask). A wider spread typically indicates lower liquidity, while a narrower spread often suggests a highly liquid market where many transactions occur.

This definition highlights the importance of maintaining a specific spread to ensure fair pricing and efficient market operations. It can impact trading strategies and the overall market environment, affecting how easily traders can enter and exit positions. Understanding this minimum spread helps traders recognize market conditions and adjust their strategies accordingly.