1. Electronic Trading: Introduction
  2. Electronic Trading: The Nasdaq Vs. The NYSE
  3. Electronic Trading: The Role of a Specialist
  4. Electronic Trading: The Role of a Market Maker
  5. Electronic Trading: SuperDOT
  6. Electronic Trading: Electronic Communications Networks (ECNs)
  7. Electronic Trading: Small Order Execution System (SOES)
  8. Electronic Trading: Level I, II and III Access
  9. Electronic Trading: Conclusion


The NYSE facilitates trading through a human being who is known as the specialist. Each stock listed on the NYSE is allocated to a specialist and all the 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 the bid and ask orders meet. (For more insight, see Why The Bid-Ask Spread Is So Important.)

The specialist doesn't only match 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 an equilibrium price is reached, which is when demand and supply are very close. Buying an inventory of stocks is not a common occurrence. In fact, it is estimated that a specialist will be in on only one out of every 10-15 trades.

Another duty that a specialist attends to occurs if a customer's order is priced at a level higher than the lowest ask, or lower than the best bid price (known as a stop order). The specialist will then hold the order and execute it if and when the price of the stock reaches the level specified by the customer. (For related reading, check out Understanding Order Execution and The Basics Of Order Entry.)

A final responsibility of the specialist is to find a fair price for each of the stocks that he or she is responsible for at the beginning of every trading day. This fair price is based on the current supply and demand of the stock. The NYSE opens for trading at 9:30am, but if the specialist can't find a fair price, he or she may delay the opening of trading on a stock until that fair price is found.

It is the specialist's job to act in a way that benefits the public. Because specialists are responsible for keeping the market in equilibrium, they are required to execute all customer orders ahead of their own.

Electronic Trading: The Role of a Market Maker

Related Articles
  1. Investing

    The Basics Of The Bid-Ask Spread

    The bid-ask spread is essentially a negotiation in progress. To be successful, traders must be willing to take a stand and walk away in the bid-ask process through limit orders.
  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. Investing

    Negotiating the Bid

    A bid is an offer investors make to buy a security.
  5. Markets

    Stock Quotes Explained

    Curious about how stock quotes are compiled and what a trader should know about how? Read on.
  6. 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!
  7. 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.
  8. Markets

    How Bid Price Affects Liquidity

    The bid price is the amount a buyer will pay for a security.
  9. 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, ...
  10. Trading

    Online Stock Traders

    Online stock traders place buy/sell orders for financial securities and/or currencies with the use of a brokerage's Internet-based proprietary trading platforms. The use of online trading increased ...
Trading Center