Normal Market Size

Normal market size is the minimum number of securities for which a market maker is obliged to quote firm bid and ask prices. In a quote driven market, market makers cannot be expected to offer quotes that are firm up to an unlimited size. But to provide the necessary liquidity investors need to be able to rely on market makers to take reasonable quantities of a security at the quoted price. On the London Stock Exchange, normal market size for each security is calculated quarterly and is based on 2.5 per cent of the security's average daily turnover in the preceding year. Market makers are usually prepared to quote firm prices for volumes larger than the NMS.