Negative Obligation

DEFINITION of 'Negative Obligation'

An obligation of NYSE specialists to remain on the sidelines and refrain from acting as principal when there is sufficient market demand and supply to efficiently match orders.

BREAKING DOWN 'Negative Obligation'

The negative obligation ensures that specialists are not getting involved in the market on their own behalf when the market is able to "make itself" and sufficiently match buyers with sellers. This obligation on the specialists provides the public with the opportunity to transact with each other without specialist intervention.

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  2. 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 >>
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    The correct answer is d. A good example of an exchange using the specialist system is the NYSE. Each stock listed on the ... Read Answer >>
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    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 >>
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