The Acting As an Agent

The  DMM is also required to execute orders that have been left with them. Orders that have been left with the specialist for execution are said to be “left, or dropped, on the book”.  The  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  DMM are:

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

The  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 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 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  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 inside market. There are certain types of orders that are not included when determining the inside market and they are:

  • Stop orders
  • All or None orders

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