Explanation of Bid/Ask quotes

[izonim]

Can someone please explain the huge bid/ask spreads I'm seeing on stock quotes? For instance, I'm looking at MSFT in an esignal quote window. The price is 27.89, the bid is 9.71, and the ask is 46.13. I see the same type of thing on other stocks: YHOO, EBAY, DELL, etc. I've got to be missing something. Can anyone let me know why these spreads are like this? Thanks.

[DuaneG]

Hi Izoim,

I'm not seeing any large spreads with the symbols you provided. We also haven't had any reports of this type of behavior this morning. If you could let me know if you are still having this issue, we'll work to replicate it. Thanks.

[izonim]

Thanks for the reply. The large bid/ask spreads seem to happen every evening. It's 9:45PM PST, and many symbols have these large spreads. I understand that bid/ask prices aren't valid if the market isn't open. This wouldn't be an issue for me except that my technical analysis method uses bid/ask prices even after trading hours, so I'm getting weird results. I'm assuming that I won't be able to use bid/ask after market hours, but am trying to find out what the large spreads are about. I've attached a screenshot of an eSignal quote window that shows the large spreads. Any information on why the prices are like this would be most helpful. Thanks!

[DuaneG]

Izonim,

Thanks for the image. I have a suspicion of what we're seeing here, but I would like to have the QA department take a look at it and provide some feedback before I venture my take on this. As soon as I hear back, I'll re-post to this thread. Thanks again.

[DuaneG]

Izonim,

As I suspected, this is the way some market makers will remove themselves from the market and active trading. By posting bid and ask prices that are well out the normal spread range, they are moving themselves away from the current action. This is done to insure that any standing orders are not filled; hence removing themselves from the market. Looking through Time and Sales, I found the actual prints from the record.

[izonim]

That makes sense. I'll adjust the software accordingly. Thanks for the help!