Bid Wanted In Competition - BWIC
Categories: Trading, Regulations, Stocks, Bonds
You know the song an ice cream truck plays? The one that drives every kid in the neighborhood screaming out their front doors? Now imagine that the ice cream truck only has a limited number of ice cream sandwiches and Good Humor bars. It also doesn't have set prices.
Instead, the ice cream man is going to drive around, playing that song, and collecting bids for the ice cream. Once he figures out the best bids, he'll come back later to deliver the ice cream and collect the money.
In that scenario, the ice cream song is like a bid wanted in competition. Basically, it announces that something is for sale and that the seller is ready to receive bids. It begins a process that ends when the seller determines the best bids for what it's selling.
The process usually comes up for people selling large amounts of securities, such as stocks and bonds. Once the best bid is determined, the buyer and seller can close the transaction. Which is even more satisfying than a Choco Taco.
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Finance: What is Spread?48 Views
finance a la shmoop. what is spread? before we start just no. get your mind
out of the gutter. spread refers to the money value between [100 dollar bill]
a bid and ask price under a market maker structure of trading securities. no more
wire hangers, a plastic hanger company is publicly traded on an exchange like
Nasdaq where buyers bid for a price to purchase and sellers ask for a price to [Nasdaq wall shown]
trade. no more wire hangers is bid this moment at 37:23 a share by buyers
willing to buy right now at that price and is being asked at this moment at a
price of 37.31. note the eight cents a shared difference in the share prices.
that dif is the spread between the two prices, and it's worth noting that in [bread is buttered]
extremely volatile stocks, the spread widens. and in boring highly liquid
stocks which don't move much, the spread tightens or is narrower. that is on a
volatile equivalent of no more wire hangers the spread might grow to 20 or
30 cents a share whereas a boring name that pays a big dividend and the stock
never moves much we're thinking AT&T here, [man snores at a desk]
well that spread might be just three or four cents. so why grow? well because a
market maker in a volatile stock doesn't want to be caught losing money on her
inventory. if no more wire hangers suddenly gapped down to 37.10 a share [equation shown]
well it would be likely less than the average of what the market maker paid
for her quote "inventory" unquote in that stock from which he was making a market
in it. each time the shares trade the market makers dip into that spread to [woman dips cracker in butter]
pay their bills and allow them to keep doing business. so that's spread. and it's
not the type that Prince used to sing about. [man on stage]