Understanding Market Versus Quote (MVQ): Essential Insights and Meaning

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. The security being quoted can be an investment contract, note, bond, stock, or derivative.

Exploring the Role of Market Versus Quote in Trading

Market versus quote (MVQ) comes up when the bid price is the same price at which a buyer is willing to purchase a security. The ask price is the price a seller is willing to accept for a security. Usually, the best bid and ask prices will be close to the market price, but occasionally, particularly in a thinly-traded security, the market price can differ significantly from the bid-ask price. Securities that trade at high volume and with greater liquidity typically have a smaller MVQ value. Conversely, securities that are illiquid will generally have a larger MVQ value.

This relationship means a trading instrument's market versus quote value can provide an indication of the type of liquidity under which the instrument trades. Higher values can signal a thinly-traded instrument that investors may find more challenging to trade. Meanwhile, smaller values may identify instruments that trade at higher volumes and maintain higher levels of liquidity, making them ideal candidates, especially for active traders and short-term traders.

The Importance of Market Versus Quote in Assessing Liquidity

A stock’s MVQ can inform an investor of its liquidity. A smaller MVQ value suggests that a security is more liquid than one with a higher MVQ. For example, assume that stock ABC last traded at $42.50 per share and the current bid-ask prices are $42.48 and $42.52, respectively. Stock ABC has an MVQ value of two cents, which is considered a small value and thus indicates a liquid instrument. Stock XYZ, on the other hand, 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, which is considered a large value and indicates an illiquid trading instrument.

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. A trading instrument’s MVQ also indicates the amount a market maker or broker takes as a commission for trading a security on a buyer or seller's behalf. 

A market maker is a market participant or a member firm of a stock exchange. Market makers buy and sell securities at prices displayed in the exchanges' trading system for either their own accounts, which are called principal trades, or customer accounts, which are called agency trades.