National Market System

National Market System (NMS)

Refers to over-the-counter trading. System of trading OTC stocks under the sponsorship of the NASD. Must meet certain criteria for size, profitability and trading activity. More comprehensive information is available for NMS stocks than for non-NMS stocks traded OTC (high, low, and last-sale prices, cumulative volume figures, and bid and ask quotations throughout the day). This is due to the fact that market makers must report the actual price and number of shares in each transaction within 90 seconds verses nonreal-time reporting for non-NMS stocks (thus, last sales prices and minute-to-minute volume updates are not possible).

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national market system (NMS)

1. A centralized system for reporting transactions and quotations from all qualified market makers. A national market system has been encouraged by the SEC as a trading system that would increase competition among exchanges and market makers, thus providing investors with more liquidity and better prices. Essentially, a national market system is envisioned as a single large market in which market makers are linked by telecommunications with information being freely available. Customer orders would be automatically filled at the best available prices.

2. See Nasdaq.

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National Market System

A trading system listing securities that trade in both New York and on regional exchanges. This allows investors to find the best price available for securities. The NMS also facilitates trading of certain over-the-counter stocks. It is sponsored and managed by NASDAQ and FINRA. See also: 19c-3 stock.

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National Market System (NMS). The National Market System (NMS) links all the major stock markets in the United States and was developed to foster competition among them.

Federal rules require these trading centers to ensure that transactions are executed at prices at least as good as protected quotations displayed at another center. A protected quotation is one that's immediately and automatically accessible.