Market Makers
A narrow bid-ask spread typically indicates:
Narrow spread = high liquidity. Wide spread = low liquidity, higher trading costs.
Complete Analysis & Legal Rationale
A narrow (tight) spread indicates high liquidity and an efficient market. When trading volume is high and many market makers compete, spreads narrow. Wide spreads typically indicate less liquid securities with fewer market makers.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Does not match the governing securities rule described in the explanation.
Matches the verified teaching point in the explanation.
Does not match the governing securities rule described in the explanation.
Does not match the governing securities rule described in the explanation.
Official Standard: Governs options accounts, approvals, and related supervisory requirements (verify current text).
Official Standard: Outline-level citation: item maps to Series 7 topic coverage. Prefer a specific FINRA/SEC/MSRB rule citation in a later author pass.