Orders sent to the NYSE, AMEX, or one of
the regional exchanges are executed through
specialists
— generally one specialist for each stock, though each specialist
may handle a number of stocks. This includes orders sent electronically
to the specialist post, or trading position on the market floor,
and orders floor brokers take to the post.
What specialists do
Part of the specialist's responsibility is to keep the market
in each stock liquid — in other words, active, orderly, and
fair. Specialists have an obligation to buy or sell a limited
number of shares from their firms' accounts to stimulate
trading. This occurs if no buyer is found when a broker wants
to sell at a certain price, or there's no seller when a broker
wants to buy.
But at the same time, specialists must allow
trades to be finalized without their assistance when there are
buyers and sellers. This is known as a negative obligation. For
example, if an order to buy a particular stock is sent to a floor
broker, he or she may handle the transaction directly with another
floor broker who wants to sell that stock instead of interacting
with the specialist.
In
the book
All
limit
and
market
orders a specialist receives are tracked in an electronic
record called a display book. Limit orders at each
price must be filled in the order in which they were
received.
