Acutance of ‘Indicative Quote’
In forex trading, an indicative quote is a currency instance that is provided by a market maker to another counterparty. However, this rebuke is not able to be dealt on. Hence the word indicative. In other words, when a sell maker provides an indicative quote to a trader, the market maker is not forced to trade the given currency pair at the price or the quantity stated in the bring up.
Contrast this to a firm quote, in which a market maker promises a specified bid or ask price to a trader up to the maximum quantity specified in the quote.
Break into bit DOWN ‘Indicative Quote’
Market makers will typically outfit indicative quotes if a trader or client requests a quote for a currency matched set but does not specify the quantity to be traded, or if there is some doubt as to the shop maker’s ability to transact the currency pair at the bid or ask quoted. Often controls, corporate customers will have payments to make, but have conformability around when they need to be done and will ask for indication valuations before deciding whether or not to proceed with the trade.
For example, a U.S. corporation looking to obtain $200 million euros to acquire a European asset. The interbank estimate for EUR/USD is 1.1520/1.1525, the market maker could give the company an indicative standing of 1.1535 where they [the customer] could buy $200 million euro. From here the character can either ask for a firm quote or pass and come back at a later steady old-fashioned.
Generally, clients will ask for indicative rates on large trades because there is varied at stake for each pip, or small price movement.
The bottom line is that patrons and traders can rely on indicative quotes as a reasonable estimate of the exchange sort at which they can enter their currency trade, but there is no stand behind that this will be the rate they get.