Q:

A _______ is a person on the trading floor of certain exchanges who holds an inventory of certain stocks. This person is responsible for managing limit trades, but doesn't make info on outstanding limit orders available to other traders.
a) Floor broker
b) Market maker
c) Registered trader
d) Specialist
e) Commission Broker

A:

The correct answer is d.
A good example of an exchange using the specialist system is the NYSE. Each stock listed on the NYSE is allocated to a specialist and all buying and selling of a stock occurs at the location of this person, known as "the trading post." Buyers and sellers represented by a floor trader will meet at the trading post to learn about the best current bid and ask price for a security. These bid and ask offers are called out loud and indicate the current prices to any interested party. A trade will be executed when bid and ask orders meet.

The specialist doesn't only meet up buyers and sellers. Many specialists are forced to hold an inventory of shares themselves to minimize the imbalance of buy and sell orders. The specialist does this until a equilibrium price is reached, i.e. when demand and supply are very close. Buying an inventory of stocks is not a common occurrence, it is estimated that a specialist will be in on only 1 out of every 10-15 trades.

Have a Financial Question?

MORE FAQS

  1. No results found.

RELATED FAQS

  1. What are the differences between a Chartered Financial Analyst (CFA) and a Certified ...

    Understand the differences between a Chartered Financial Analyst and a Certified Financial Planner. Learn how each approaches ...
  2. How do I become a Chartered Financial Analyst (CFA)?

    Understand what it means to hold the Chartered Financial Analyst designation. Learn how a candidate can work to become a ...
  3. What types of positions might a Chartered Financial Analyst (CFA) hold?

    Understand what types of positions a Chartered Financial Analyst can hold. Learn what is available to those who have only ...
  4. Who benefits the most from prepaid expenses?

    Learn who benefits most when expenses are prepaid. Individuals and businesses often make payments, such as rent or insurance, ...
  5. If I am looking to get an Investment Banking job. What education do employers prefer? ...

    If you are looking specifically for an investment banking position, an MBA may be marginally preferable over the CFA. The ...
  6. Can I still pass the CFA Level I if I do poorly in the ethics section?

    You may still pass the Chartered Financial Analysis (CFA) Level I even if you fare poorly in the ethics section, but don't ...
RELATED TERMS
  1. Chartered Financial Analyst - CFA

    A professional designation given by the CFA Institute (formerly ...
  2. Personal Financial Advisor

    Professionals who help individuals manage their finances by providing ...
  3. CFA Institute

    Formerly known as the Association for Investment Management and ...
  4. Security Analyst

    A financial professional who studies various industries and companies, ...

You May Also Like

Hot Definitions
  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  2. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  3. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  4. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  5. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  6. Economies Of Scale

    Economies of scale is the cost advantage that arises with increased output of a product. Economies of scale arise because ...
Trading Center