What Is a Quote-Driven Market?
A quote-driven market is a way of organizing trading in which prices come from market makers who continuously publish two prices for a security: a bid price at which they will buy and an ask price at which they will sell. Investors trade against these posted quotes. Buyers and sellers do not necessarily meet each other directly, because the dealer takes the other side of the trade.
How It Works
In a typical quote-driven setup, a dealer displays a bid and an ask for a security. An investor who wants to buy pays the ask, and an investor who wants to sell receives the bid. The gap between the two is the bid-ask spread, which compensates the dealer for holding inventory and taking on risk. Dealers adjust their quotes as market conditions, their inventory, and customer demand change.
Quote-driven trading is common in markets without a single central order book, such as parts of the over-the-counter market, many bond markets, and the interbank foreign exchange market. The Nasdaq stock market was also historically built on dealer quotes.
Quote-Driven Versus Order-Driven
The alternative is an order-driven market, where buy and sell orders are collected in a central order book and matched according to rules such as price and time priority. In an order-driven market, prices emerge from the orders themselves. In a quote-driven market, prices are set by the dealers' posted quotes, although those quotes are shaped by the order flow dealers receive.
Why It Matters to Investors
Quote-driven markets can supply liquidity in securities that trade infrequently, because a dealer stands ready to trade even when no other investor is on the opposite side. The cost of that service appears in the spread. Because quotes can differ between dealers, and because some markets are less transparent than others, the spread and the price at which a trade actually executes are worth examining.
Updated November 8, 2026. For general education only; not financial, tax or legal advice.