Markdown

Markdown

The amount subtracted from the selling price of securities when they are sold to a dealer in the OTC market. Also, the discounted price of municipal bonds after the market has shown little interest in the issue at the original price.

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markdown

1. A decrease in a security price made by a dealer because of changing market conditions. For example, a bond trader may take a markdown in long-term bonds held in inventory when market interest rates rise. Compare markup.

2. The difference between the price paid by a dealer to a retail customer and the price at which the dealer can sell the same security to a market maker. Compare markup.

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Markdown. A markdown is the amount a broker-dealer earns on the sale of a fixed-income security and is the difference between the sales price and what the seller realizes on the sale.

The markdown may or may not appear in the commission column or be stated separately on a confirmation statement.

A markdown is determined, in part, by the demand for the security in the marketplace. A broker-dealer may charge a smaller markdown if the security can be resold at a favorable markup.

The term markdown also refers more generally to a reduced price on assets that a seller wants to unload and will sell at less than the original offering price.