This question got me confused.
“In a dealer market trading system shares of stock are sold to the investor with the highest bid price and bought from the seller with the lowest offering price.”
Is this true or false?
False.
The bid price is the price the dealer will pay to buy; the offering (or ask) price is the price the dealer will accept to sell.
I thought as an investor you sell to the dealer with the highest bid price. As the bid price is the highest price someone is willing to pay to purchase the stock?
I believe that that’s what I said:
Dealers pay the price they bid, so investors sell to a dealer at the dealer’s bid price.
Naturally, if there are several dealers with different bid prices, you’d choose to sell to the one with the highest bid.
So in this situation is the dealer not the investor?
The prices are always quoted by dealers/market makers. So look at it from their perspective. And remember the old Pepsi commercial “Ask for more”. So always ASK>BID
Correct: dealers are not investors.
Dealers are . . . dealers.