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Normal market sizeWhen shares are traded on the London Stock Exchange, the market makers have to quote a bid price and and offer price at which they will deal. But the prices they quote, which are disseminated to brokers via the SEAQ system, only have to be honoured up to a certain size of order. The Normal Market Size defines what that figure is for each company and it is based on a percentage of the share's average daily turnover in the previous year.To understand the point of NMS, you have to remember that some listed companies have hundreds of millions of shares in issue, and some have low thousands. The effect on the share price of someone buying 5,000 shares will be much greater if the company is a small one than if it is a blue chip, and it would be unfair on a market maker if the offer price quoted had to apply to any buy order no matter how large.The general rule is that quotes on a n SEAQ screen are really only relevant if the size of an order being placed (whether a buy order or sell order) is within the NMS. If it is higher than the NMS, the market maker will not be obliged to deal at the quoted prices.The NMS system replaced the previous alpha, beta, gamma, delta shares system which was a reflection of the order of the most actively traded shares but had unintentionally become a measure of corporate strength, status and reliability.Similar MatchesCumulative abnormal return (CAR)Cumulative abnormal return (CAR)Sum of the differences between the expected return on a stock (systematic risk multiplied by the realized market return) and the actual return often used to evaluate the impact of news on a stock price. Normal Market Size (NMS)Normal Market Size (NMS)A system that categorizes the size of transactions that are normal for a particular security and forces market makers to deal within these sizes. Normal backwardation theoryNormal backwardation theoryHolds that the futures price will be bid down to a level below the expected spot price. Normal annuity formNormal annuity formThe manner in which retirement benefits are paid out. Normal valueNormal valuePrice charged for a product on the domestic market of the producer. Used to compare with export price in determining dumping. Further SuggestionsNormal portfolionormal retirement age Normal Distribution normalised earnings Normal growth firms Standardized normal distribution normal retirement date Permanent normal trading relations normal trading unit Normal trading unit Normal random variable Normal retirement Normalized earnings Normal investment practice |
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