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Question

Difficulty: HardThe Capital Market: Stock Exchange, Securities, and Trading

During trading on the stock exchange floor, an investor instructs a licensed intermediary to sell a block of equity shares. The intermediary approaches an independent dealer on the floor who quotes two distinct prices simultaneously—a lower price at which they will purchase the shares and a higher price at which they will sell—without knowing whether the intermediary intends to buy or sell. Which stock exchange operator acts as this principal market dealer quoting two-way prices?

  1. JobberAnswer
  2. B
    Stockbroker
  3. C
    Stag
  4. D
    Authorized clerk

Answer

The correct answer is the Jobber, who functions as a principal market maker on the floor of the stock exchange by quoting two-way (bid and offer) prices.
The jobber is a wholesale dealer on the stock exchange who buys and sells securities on their own account. By quoting two prices (the bid/buying price and the offer/selling price), the jobber acts as a market maker, providing liquidity to stockbrokers who represent investors.

Step-by-Step Solution

1
Analyze the role described in the scenario
The operator acts as an independent dealer who trades on their own account and provides continuous liquidity by quoting two-way (buy and sell) prices without prior knowledge of the transaction side.
Market makers buy and sell securities directly as principals rather than acting purely as agents for clients.
2
Distinguish between floor operators in the capital market
Stockbrokers act as agents for public clients, whereas jobbers act as market-making principals who deal only with brokers.
Under traditional stock exchange rules, jobbers cannot deal directly with the general public.
3
Match the functionality to the correct term
The jobber is the specific stock exchange operator responsible for quoting two-way prices.
The spread between a jobber's buying price and selling price represents the jobber's turn (profit margin).

Key Concept

Roles of Stock Exchange Floor Operators and Market Makers
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Topics

The Capital Market: Stock Exchange, Securities, and Trading

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