Stocks that aren’t listed on a conventional exchange but trade through the NASDAQ system are managed with a very different mechanism. There’s absolutely no centralized exchange, but there’s a method of competing market makers who post quotes on NASDAQ stocks. The spreads between the bid and ask prices are normally much larger for NASDAQ stocks compared to equal exchange-listed stocks, and also the amount of shares that the traders quote are generally not representative of the willingness to exchange. Much like exchange-listed stocks, your agent can let you know what the best quotes are at any given moment.
If you place a market order, you will most likely get the order filled at the current bid or ask quote. Limit orders on NASDAQ are managed quite differently from limit orders on the NYSE or Amex. Most likely, your limit order will remain with your brokerage firm and be implemented if the market makers’ quotes vary to satisfy your order. By way of instance, suppose that you’re thinking about buying a NASDAQ-traded inventory whose best exhibited quotes are a bid of $8 and an offer of $8.75. If you put a limit buy order at $8.25, your purchase probably won’t be filled until one of those market manufacturers decreases their request quote from $8.75 to $8.25. Your agent is under no obligation to display your order outside the firm. Lots of the larger brokerage companies maintain their own internal limit order books, but there is no formal limit order book such as those that the exchanges maintain for exchange-listed stocks. Thus, your order to purchase at $8.25 may go unfilled even if there’s an order at another brokerage firm to sell at $8.25.
Unlike the NYSE, the market makers may trade in front of your limit order even when you placed your order . Additionally it is important to consider what may happen if your limit order isn’t filled within a reasonable period of time, and you still wish to trade the stock. If you think the stock will make a significant play, then it could proceed before your limit order becomes filled. On the other hand, if you aren’t expecting the stock to go anywhere soon, perhaps it doesn’t run away from you. If you really need to get the transaction done, you want to think about this danger that the stock may run away from you.