Wha is the 'Order Book Official'

An order book official (OBO) is the trading floor participant responsible for maintaining a list of public market or limit orders of a specific option class using the "market-marker" system of executing orders. The purpose is to maintain a fair and orderly market in the assigned options, including executing orders sent in by member firms. The OBO is compensated by a salary paid to him /her by the exchange.

BREAKING DOWN 'Order Book Official'

Order book officials are employees of the exchange and cannot trade for their own account. Their sole responsibility is to maintain the market for their assigned listed options, including executing orders remaining on the book. The term is sometimes used in reference to a current list of public market or limit orders for a given exchange. For example, a list of specific public orders awaiting execution on the Chicago Board Options Exchange (CBOE) could be referred to as the "order book official".

This differs from designated market maker (DMM), formerly known as specialist on the NYSE or other exchanges who, as members of the exchange, must trade their own account in addition to the OBO functions of maintaining a fair and orderly market and executing orders on the book.

The OBO is also responsible for maintaining a book of limit and stop orders left for him /her by the public. Members may not leave such orders. When the order's specific conditions are met, that order is then executed.

Role of the Order Book Official

Trading on an options exchange includes many different functions. Unlike other exchanges, including stock exchange, the CBOE divides the designated market maker (specialist) function into two separate functions. A market maker, who acts as a dealer with his /her own inventory, and an order book official, who handles the book of customer limit orders.

The market maker posts bids and offers for a given options contract. They also cannot deal directly with the public. They also must maintain a continuous market by always posting their bids and offers.

The order book official keeps track of these posts for an assigned group of options and makes sure the market remains fluid and fair. OBOs may not act as dealers and do not hold inventory.

The floor broker is a middleman acting as an agent for clients, indirectly giving them the best access possible to the exchange floor. The floor broker does not hold inventory.

Public orders take priority over orders from market makers and floor brokers.

  1. Limit Order

    A limit order is an order placed with a brokerage to execute ...
  2. Away From The Market

    Away from the market means the bid on a limit order is lower ...
  3. Order

    An order is an investor's instructions to a broker or brokerage ...
  4. Limit Order Information System ...

    A limit order information system is an electronic system used ...
  5. Bracketed Buy Order

    Bracketed buy order refers to a buy order that has a sell limit ...
  6. Time In Force

    Time in force is an instruction in trading that defines how long ...
Related Articles
  1. Investing

    The Basics of Trading a Stock: Know Your Orders

    Taking control of your portfolio means knowing what orders to use when buying or selling stocks.
  2. Trading

    Why Limit Orders May Cost More Than Market Orders

    Learn the difference between a market order and a limit order, and why a trader placing a limit order sometimes pays higher fees than a trader placing a market order.
  3. Trading

    Stop-Loss or Stop-Limit Order: Which Order to Use?

    While both can provide protection for traders, stop-loss orders guarantee execution, while stop-limit orders guarantee price.
  4. Trading

    What's The Difference Between A Stop And A Limit Order?

    Find out what separates these two market orders and what they can do for you.
  1. Why are Traders on the Floor of the Exchange?

    Learn how trading on the floor of the stock exchange has evolved over time with computers now managing the majority of buying, ... Read Answer >>
  2. What is the difference between a buy limit and a stop order?

    Learn the difference between buy limit orders and stop orders, including stop loss orders, and understand the risks of the ... Read Answer >>
  3. What is the difference between a buy limit and a sell stop order?

    Understand the differences between the two order types, a buy limit order and a sell stop order, and the purposes each one ... Read Answer >>
  4. 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 >>
Trading Center