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Markdown

The difference between the highest current bid price among broker-dealers in the market and the lower price that a dealer charges a customer.

Notes:

The broker offers a lower price to try stimulate trading in hopes that they will make the money back on the extra commissions.

See also: Bid, Broker-Dealer, Dealer, Markup

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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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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.