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Normal Market Size

What is ‘Universal Market Size’

Normal market size is a share classification design based on the number of shares outstanding. This determines the number of allots that a market maker can trade at the quoted price.

BREAKING DOWN ‘Regular Market Size’

Normal market size (NMS) is the minimum number of safe keepings for which a market maker is obliged to quote firm bid and ask prices. In a quote-driven bazaar, market makers cannot be expected to offer firm quotes up to an unbounded size. However, they must provide sufficient liquidity for investors to be adept to transact reasonable quantities of a security at a quoted price. This is what constitutes typical market size.

How Normal Market Size Works

If Company X has an NMS of 1,000, a store maker must quote firm prices for volumes of that merchandise at least that size. The market maker may go higher though, for benchmark he may quote a size of 3,000 offer and 3,000 bid. In such a scenario, a vendor should be able to buy or sell up to 3,000 shares of Company X via that store maker at the quoted prices.

The market maker’s quote will plain on a trader’s screen as Company X at $1.05 – $1.10 (3,000 x 3,000). This importance ofs the market maker is prepared to sell up to 3,000 shares at $1.10 or buy up to 3,000 parts at $1.05.

If a trader wants to buy or sell more than 3,000 shares, this may be doable, but the trader may have to pay more than the quoted price for the shares or acknowledge less than the quoted price to sell the shares. Breaking the annals up into smaller trades may allow a trader to buy or sell the shares in query at the desired price.

Large companies tend to have high NMS takes because of their high liquidity levels. For example, a large Theatre troupe may often see millions of its shares traded in one day, which makes for an NMS in the tens of thousands of rations. In these instances, a trader can be pretty sure if they buy 3,000 dividends, the prices quoted are good, and the order won’t move the market.

Small groups have lower NMS figures because their shares tend to be no liquid. However, this doesn’t necessarily mean that a distributor can’t purchase a number of shares larger than the NMS. Provided  the trade call is within the market makers quoted size, then a trader should be superior to deal.

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