Prequotation

Prequotation is a term used in finance and trading, particularly in the context of securities markets. It refers to an indication of price or a price range that a potential buyer or seller is willing to transact at, but it is not yet a firm or binding offer. Essentially, it's a preliminary expression of interest in a price before a formal quotation or trade is executed.

Prequotations are often provided by market makers, brokers, or financial institutions to gauge market sentiment and identify potential trading partners. They can be communicated verbally or through trading platforms. Unlike a firm quote, a prequotation does not obligate the party providing it to execute a trade at that price. The price can change rapidly or be withdrawn entirely based on market conditions, order flow, or further negotiation.

The purpose of a prequotation is to facilitate price discovery and to help participants understand the prevailing market conditions without committing to a specific transaction. It allows for a more dynamic and responsive trading environment, especially in less liquid markets where firm quotes might be scarce. Traders may use prequotations to assess the feasibility of a trade before dedicating resources to obtaining a formal, executable quote.