A:

Before we address this question, let's review what specialists do. Specialists are people on the trading floor of an exchange, such as the NYSE, who hold inventories of particular stocks. A specialist's job is not only to match buyers and sellers, but also to keep an inventory for him or herself that can be used to shift the market during a period of illiquidity.

The job of the specialist originated in 1872, when it was recognized that there was a need for a new system of continuous trading - before this, each stock had a set time during which it could be traded. Under the new system, brokers began to deal in a specific stock to remain at one location on the floor of the exchange. Eventually, the role of these brokers evolved into that of the 'specialist'.

It is the specialist's job to act in a way that benefits the public above all. Every specialist accomplishes this by filling the four vital roles of (1) auctioneer, (2) catalyst, (3) agent and (4) principal. Let's take a closer look at what a specialist does in fulfilling each of these roles:

  1. Auctioneer – Shows best bids and offers, becoming a 'market maker'.
  2. Catalyst – Keeps track of the interests of different buyers and sellers and continually updates them.
  3. Agent – Places electronically routed orders on behalf of clients. Floor brokers can leave an order with a specialist, freeing themselves up to take on other orders. Specialists then take on the responsibilities of a broker.
  4. Principal – Acts as the major party to a transaction. Since specialists are responsible for keeping the market in equilibrium, they are required to execute all customer orders ahead of their own.

The specialists at the NYSE are employed by seven firms. Companies listed on certain exchanges will interview employees of the specialist firms, seeking out suitable people to represent them (by holding inventories of the companies' stocks). Here are the seven NYSE specialist firms:

  1. Bear Wagner Specialist LLC.
  2. Fleet Specialist, Inc.
  3. LaBranche & Co., LLC.
  4. Performance Specialist Group, LLC.
  5. Spear, Leeds & Kellogg Specialists LLC.
  6. SIG Specialists, Inc.
  7. Van der Moolen Specialists USA, LLC.

(For additional reading, see The Tale Of Two Exchanges: NYSE And Nasdaq and Getting To Know Stock Exchanges.

RELATED FAQS
  1. What's the difference between a Nasdaq market maker and a NYSE specialist?

    What's the main difference between a specialist and a market maker? Not much. Both the New York Stock Exchange (NYSE) specialist ... Read Answer >>
  2. When a floor broker asks a specialist, “How’s PDQ?” ...

    The correct answer is d) When the specialist gave the floor broker the quote of “59.20 to 35; 6 by 11,”  the quote meant ... Read Answer >>
  3. When a floor broker asks a specialist, “How’s PDQ?” ...

    The correct answer is d. When the specialist gave the floor broker the quote of “59.20 to 35; 6 by 11,” the quote meant that ... Read Answer >>
  4. What's the average salary of a human resources (HR) specialist?

    Discover the national average salary for a human resources (HR) specialist in the as well as for regions throughout the United ... Read Answer >>
  5. How do financial advisors execute trades?

    Understand how financial advisors normally execute an investor's trades. Learn about the different type of markets and exchanges ... Read Answer >>
  6. What kind of assets can be traded on a secondary market?

    Learn about the difference between the primary market and the secondary market, and what types of assets are traded on secondary ... Read Answer >>
Related Articles
  1. Managing Wealth

    E-Marketing Specialist: Career Path & Qualifications

    Learn more about the duties and responsibilities performed by eMarketing specialists and common career paths this profession takes.
  2. Financial Advisor

    eMarketing Specialist: Job Description & Average Salary

    Understand the scope of work of an e-marketing specialist, and learn about the career's required education, skills and average earnings.
  3. Investing

    The NYSE And Nasdaq: How They Work

    Learn some of the important differences in the way these exchanges operate and the securities that trade on them.
  4. Financial Advisor

    What the Ultra-Wealthy Want from Their Advisors

    When accessing products and solutions, the wealthy prefer using their relationship manager to a specialist, according to a new study.
  5. Investing

    Electronic Trading: The Nasdaq Vs. The NYSE

    From a glance, the difference between the New York Stock Exchange (NYSE) and Nasdaq may not be marked. The NYSE lists household names like Coca-Cola, Wal-Mart, Citicorp, and General Electric, ...
  6. Markets

    Stocks Basics: How Stocks Trade

    Most stocks are traded on exchanges, which are places where buyers and sellers meet and decide on a price. Some exchanges are physical locations where transactions are carried out on a trading ...
  7. Markets

    Getting To Know The Stock Exchanges

    Here are the answers to all the questions you have about stock exchanges but are too afraid to ask!
  8. Trading

    Market Breadth: Introduction

    Each day at the posts of specialists at the New York Stock Exchange, and inside the networked computers of Nasdaq market makers, a battle between bulls and bears rages. Each side tries to pull ...
  9. Retirement

    Earn Big Bucks With A Specialized Financial Career

    Choosing to specialize may be easier for you and more beneficial to your clients.
  10. Markets

    Customize Your Trading With Flex Options

    These unique instruments take options trading to a whole new level.
RELATED TERMS
  1. Specialist

    A member of an exchange who acts as the market maker to facilitate ...
  2. Specialist Short Sale Ratio

    A ratio used to determine the sentiment of specialists on the ...
  3. Write Out

    A dual trade transaction enacted by a specialist in an individual ...
  4. Specialist Unit

    A group of firms or individuals that act as a market maker for ...
  5. Negative Obligation

    An obligation of NYSE specialists to remain on the sidelines ...
  6. Stopped Order

    A market order on the NYSE that is stopped from being executed ...
Hot Definitions
  1. Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment ...
  2. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  3. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  4. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  5. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  6. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
Trading Center