A firm quote is a fixed buy or sell price offered by a dealer or broker-dealer firm. When a firm quote is given, it means that the person offering the quoted price is committing to pay or sell at that price. This is in contrast with a nominal quote, in which the price and quantity are not fixed, and renegotiation of the price is possible. Nominal quotes are also sometimes known as subject quotes.
In a firm quote, the person offering the quote describes both the price and the quantity. Someone might offer a firm quote offering to sell 1,000 units at $35 United States Dollars (USD), for example. This sale price will be honored until the 1,000 units are all sold. Conversely, someone might give a firm quote offering to buy 1,000 units at $35 USD, in which case the buy price will be honored until 1,000 units have been purchased.
There are a variety of reasons for people to offer a firm quote rather than a nominal quote. It can be effective in rapid trading, and can sometimes encourage fast buy and sell activities. However, with a firm quote, people do run a risk of taking a loss. If someone fixes a price for sale, for example, it may be overbid by others, and the firm quote cannot be renegotiated, so the dealer or broker-dealer is required to make the sale at the lower price. Conversely, someone may buy at a higher price than others are receiving as a result of a firm quote.
When a quote is offered, it must be identified as a firm or nominal quote so that people accepting the quote understand what kind of deal they are making. If the situation is unclear, it is advisable to ask for clarification so that there can be no confusion. In many nations, laws govern activities which surround the trading of securities, and these laws usually include stipulations that people must write out specifics so that in the event of a future dispute, the records pertaining to the deal can be used to investigate.
As with any activities in trading, it pays to have experience a skill when making decisions. People who are new can sometimes make costly mistakes by failing to grasp situations and not moving quickly enough. People who are interested in trading may consider taking classes and mentorship opportunities before branching out on their own, so that they can gain experience without having to take losses to do so.
Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a SmartCapitalMind researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.