Two Sided Market

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Definition: Two Sided Market

Two Sided Market can be defined as a market where both ask and bid price of a security are quoted by the dealers in which they make a market. This term in generally used in finance sense in the context of FINRA requirement of NASDAQ where the dealers must be willing to buy and sell the security at the prices that they quote.

FINRA stands for Financial Regulatory Industry Authority. This term is also used in bond markets where some dealers make two way markets on active and larger bonds while they make a one way market on the inactive and smaller bonds which enhances liquidity and market efficiency.

A Two Way Quote is generally used in this market where both bid and ask price is given for security and it also shows the spread between the bid and the ask giving traders idea about the liquidity in the security. This type of quote gives the investor more accurate information than the last trade quote which just indicates the price at which the stock last traded.

For example: - An Axis Bank quote would be Rs 1150/Rs 1160 which indicates that the traders can currently purchase Axis Bank shares at Rs 1160 and sell them for Rs 1150 and the spread is Rs 10.


Hence, this concludes the definition of Two Sided Market along with its overview.


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