A firm quote in trading refers to a bid or ask price provided by a market maker or dealer that is guaranteed to be honoured if the trade is executed immediately. This means that if a trader decides to buy or sell a security at the firm quote price, the market maker is obligated to execute the trade at that price, even if the market conditions change before the trade is completed.
Firm quotes are typically used in over-the-counter (OTC) markets or in situations where there may be some uncertainty about the availability of a particular security. They provide traders with a level of assurance and can be particularly important in markets with lower liquidity or when trading less commonly traded securities.
It’s important to note that a firm quote is different from an indicative quote, which is a non-binding price provided by a market maker or dealer that may change based on market conditions. Traders should be aware of the distinction between firm and indicative quotes to make informed decisions when executing trades.
