The Securities Marketplace - The Specialist / DMM Acting As An Agent

The specialist / DMM is also required to execute orders that have been left with them. Orders that have been left with the specialist / DMM for execution are said to be “left or dropped on the specialist’s / DMM’s book”.  The specialist / DMM is required to maintain a book of public orders and to execute them when market conditions permit. The types of orders that may be left with the specialist are:

  • Buy and Sell limit orders
  • Stop orders
  • Stop Limit orders
  • Both day and GTC orders
  • AON orders

The specialist / DMM will execute the orders if and when they are able to and will send a commission bill to the member who left the order with them for execution. This is known as a specialist bill and is usually only a cent or two per share. The specialist / DMM is also required to quote the best market for the security to any party that asks. The best or inside market is comprised of the highest bid and lowest offer. This is made up from bids and offers contained in the specialist’s / DMM’s book and in the trading crowd. The inside market is also the market that is displayed to broker dealers and agents on their quote system.

When quoting the inside market the specialist / DMM will add all of the shares bid for at the highest price and all of the shares offered at the lowest price to determine the size of the market. There are certain types of orders that are not included when determining the inside market they are:

  • Stop orders
  • All or None orders
Do Not Reduce / DNR


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