Market Versus Quote (MVQ): What It is, How It Works

What Does Market Versus Quote Mean?

A market versus quote (MVQ) is a comparison between the last price at which a security is traded and the most recent bid and ask prices.

Understanding Market Versus Quote (MVQ)

Market versus quote (MVQ) occurs when the bid price is the same as the price at which a buyer wants to purchase a security. The ask price is the price a seller wants to accept for a security. In general, the best bid and ask prices will be close to the market price. However, there are instances, especially with thinly-traded securities, where the market price can significantly differ from the bid-ask price. Securities that have high volume and greater liquidity usually have a smaller MVQ value. On the other hand, illiquid securities tend to have a larger MVQ value.

Having this understanding, a trading instrument’s MVQ value can indicate the liquidity of the instrument. Higher values suggest a thinly-traded instrument, which may pose challenges for investors. Conversely, smaller values may indicate instruments that have higher trading volumes and levels of liquidity. These instruments are often favored by active and short-term traders.

Why Market Versus Quote Matters

An investor can assess the liquidity of a stock through its MVQ value. A smaller MVQ value indicates higher liquidity compared to a higher MVQ value. For example, if stock ABC last traded at $42.50 per share and the current bid-ask prices are $42.48 and $42.52 respectively, the MVQ value of stock ABC is two cents. This small value reflects liquidity. Conversely, stock XYZ last traded at $42.50 but has bid-ask prices of $41.50 and $43.50. Stock XYZ has an MVQ value of one dollar, indicating an illiquid trading instrument.

In essence, the market versus quote value represents the difference between the last market price at which a security was bought or sold and the most recent bid and ask prices. Additionally, a trading instrument’s MVQ value reflects the commission amount that market makers or brokers charge for executing trades on behalf of buyers or sellers.

Market makers are market participants or member firms of stock exchanges. They buy and sell securities at prices displayed in the exchanges’ trading system for their own accounts (principal trades) or customer accounts (agency trades).