Marion,
In response to your three questions:
If your broker is a market maker in the stock you are buying or selling, will he take a limit order?
Following the implementation of the SEC order handling rule, ABSOLUTELY. In fact, all NASD member firms would be obligated to take a customer limit order. However, only those orders priced between the inside spread would be reflected in the spread. For instance, if the inside spread is 20 -20 « and your limit order is to buy at 19 3/4, your order would be held in a limit order file until the inside spread declines to within your price range. Therefore, if the inside spread becomes 19 5/8 - 19 7/8, your limit order price would be reflected in the spread (19 3/4 - 19 7/8) and it would subsequently be executed.
Will we be able to negotiate inside the spread?
Yes, by placing limit orders.
When a broker is a market maker, is he quoting the current price including the spread, or the price he sees on the screen, and then just adds his 1/8 to it?
The question isn't clear but I hope this is what you're asking. If you placed an order through your broker and her firm also makes a market in the stock, this is what a customer would pay. If the stock's inside spread is 20 - 20 «, and you placed a "market order" to buy 1000s, the trade would be executed and reported to Nasdaq at 1000s @ 20 «. In addition to paying $20,500 for the stock, the broker would charge you a commission, which as you know vary. However, there are a few firms which "add an 1/8" resulting in a $125 commission.
Alicia |
