what is a markup 
a markup is the difference between an investment s lowest current offering price among broker dealers and the price charged to the customer for said investment markups occur when brokers act as principals buying and selling securities from their own accounts at their own risk rather than receiving a fee for facilitating a transaction most dealers are brokers and vice versa and so the term broker dealer is common markups also appear in retail settings where retailers mark up the selling price of merchandise by a certain amount or percentage in order to earn a profit a pricing method whereby a retailer establishes a selling price by adding a markup to total variable costs is called the variable cost plus pricing method understanding markupsmarkups occur when certain marketable securities are available for purchase by retail investors from dealers who sell the securities directly from their own accounts the dealer s only compensation comes in the form of the markup the difference between the security s purchase price and the price the dealer charges to the retail investor the dealer assumes some risk as the market price of the security could drop before being sold to investors in business the markup is the price spread between the cost to produce a good or service and its selling price in order to ensure a profit and recover the costs to create a product or service producers must add a markup to their total costs they will express the markup as either a fixed amount or a percentage over the cost markups vs markdownsa markdown on the other hand occurs when a broker purchases a security from a customer at a price lower than its market value markdowns also occur when a dealer charges a customer a lower price for a security than the current bid price among dealers dealers might offer lower prices to customers in order to stimulate additional buying which will offset their initial losses by earning them extra commissions for retailers a price markdown is a deliberate reduction in the selling price of a good there are several reasons why a retailer may decide to markdown its goods for seasonal merchandise the retailer may be eager to clear the shelves of old merchandise to make room for the next season s goods they may slash prices to do so even if it means they take a loss on the sale some manufacturers may come out with new models of products each year or every few years in which case they will offer markdowns on older products rather than risk being stuck with obsolete inventory benefits of markupsmarkups are a legitimate way for broker dealers to make a profit on the sale of securities securities such as bonds bought or sold on the market are offered with a spread the spread is determined by the bid price what someone is willing to pay for the bonds and the ask price which is what someone is willing to accept for the bonds 