In the Quote-Driven-Market model, which statement is true?

In the Quote-Driven-Market model, which statement is true?

• A. A market maker can simultaneously post up to three quotes for ETFs on one or both sides of the order book
• B. Quotes can be entered on both sides of the book (buy and sell)
• C. During auction quotes and orders will be treated in the same way
• D. Quotes that are not matched are deleted at the end of the business day (10 p.m.)

Answer: (A)

In a quote-driven market, liquidity is provided by market makers who publish quotes indicating the prices at which they’re willing to buy or sell. The rule in this model is that a market maker can maintain up to three active quotes at the same time, and those quotes can appear on one side, or on both sides, of the order book. This exact cap and the flexibility to place quotes across sides is what the true statement is capturing. The other options don’t align with how this setup is described: the model emphasizes a fixed limit on how many quotes can be active, so simply stating that quotes can be entered on both sides without addressing the cap isn’t as precise; details about how quotes are treated during auctions or about end-of-day handling of unmatched quotes aren’t the defining feature here.

In a quote-driven market, liquidity is provided by market makers who publish quotes indicating the prices at which they’re willing to buy or sell. The rule in this model is that a market maker can maintain up to three active quotes at the same time, and those quotes can appear on one side, or on both sides, of the order book. This exact cap and the flexibility to place quotes across sides is what the true statement is capturing.

The other options don’t align with how this setup is described: the model emphasizes a fixed limit on how many quotes can be active, so simply stating that quotes can be entered on both sides without addressing the cap isn’t as precise; details about how quotes are treated during auctions or about end-of-day handling of unmatched quotes aren’t the defining feature here.