Securities Trader Representative (Series 57) Practice Exam

For a market maker who is alone at the inside bid after others lower their bids, which of the following actions is unnecessary?

1. Lower their bid

2. Notify market operations

3. Maintain current bid until a specific condition is met

4. Change their quote immediately

The correct answer is: Lower their bid

In this scenario, if a market maker finds themselves as the only entity at the inside bid following a reduction by others, it’s crucial to recognize that maintaining the current bid can be a strategic decision. The market maker may have a specific rationale for keeping their bid in place, such as anticipating a rebound in demand or needing to gather more information before reacting to the market's movements. Lowering the bid may not be the most appropriate or necessary action for the market maker when they are already positioned strongly at the inside. Instead, they can choose to uphold their bid to potentially attract buyers or maintain an advantageous position. This approach reflects a careful analysis of market conditions and existing strategies rather than a hasty decision to adjust a bid that is already in a competitive stance. Being the sole bidder also allows the market maker the option to wait for certain criteria to be met before deciding whether to lower the bid or make any other pricing adjustments, thus aligning with the idea of making informed choices regarding market operations. Therefore, among the options presented, adjusting the bid downward is unnecessary in this context.