Series 7 Exam Question 279: Answer and Explanation

Question: 279

XYZ is currently trading at 24.10–24.25. A designated market maker in XYZ could enter a bid at which of the following prices?

• A. 24.10
• B. 24.12
• C. 24.25
• D. 24.27

Correct Answer: B

Explanation:

B. A designated market maker (DMM) cannot compete with public orders, so Choices (A) and (C) are no good. The responsibility of a designated market maker is to keep trading as active as possible by narrowing the spread if necessary. Therefore, the only answer that works is Choice (B) because that answer is in-between the bid and ask prices.