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Highlights
- Refers to bid and offer prices given for valuation, not actual trading
- Must be clearly labeled as FYI (for your information) or FVO (for valuation only)
- Commonly used by market makers in the context of general equities
In the realm of equity trading, the term “nominal quotation” describes bid and offer prices provided by market makers primarily for valuation purposes rather than for executing trades. These quotations serve as indicative prices to give investors and analysts a general sense of where a security’s value lies at a given moment, but they do not constitute firm offers or invitations to trade.
Because nominal quotations are not intended to be actionable, they must be clearly distinguished from executable quotes. To avoid confusion, these indicative prices are typically prefixed with labels such as FYI (for your information) or FVO (for valuation only). These markers signal to market participants that the prices are merely for reference and should not be considered binding.
Market makers often use nominal quotations to facilitate pricing assessments, especially when liquidity is limited or when the market is less active. These indicative prices help investors gauge the approximate value of securities without necessarily implying immediate availability for purchase or sale at those levels.
While nominal quotations play a useful role in market transparency and valuation, it is important for investors to recognize their limitations and understand that actual trading prices may differ. Being aware of the distinction helps prevent misunderstandings and ensures that investment decisions are based on reliable and executable market data.
Conclusion
Nominal quotations provide valuable reference prices in equity markets, clearly marked to indicate their non-binding nature. They assist in valuation but should never be mistaken for firm trading offers, underscoring the importance of careful interpretation in investment decisions.
