WORK OF A NYSE SPECIALIST
Main Functions Specialist
On the floor New York Stock Exchange Work 1366 specialists. Most of them work for one of 7 дилерских компаний членов NYSE. Each of them controls the trading process in one, the share allotted to him. Which specialist will be responsible for trading in a particular stock decides the Board of Directors NYSE. If specialist does a good job, it can be enhanced – give to trade share more prestigious company, with a large daily volume Trade. If specialist does not cope with his duties, he may be downgraded or even fired.
For example, if he violates the trading rules or receives a lot of complaints from clients. Be specialist, this is quite an expensive pleasure. In order to have the right to work NYSE Specialist need to pay for first “armchair Specialist“. The price of such a chair reached 4 million dollars..
Main task Specialist it's support “honest and orderly” trading market in its stock. First of all, this means the execution of transactions at the best price that is possible at the moment., Minimum support Spread on quotes and preventing too sharp jumps in the share price.
One of the key figures on the stock exchange – this is NYSE specialist, it acts as an important link between the buyer and the seller, and also create a safe and fair environment for all transactions between market participants. Otherwise say, as soon as a specialist accepts a sell order, he instantly searches for a buyer at a given price. And if trader not to be quickly, Certainly, the price starts to go down. But there are situations like this., when it is simply impossible to sell. In this case, the specialist, in order to maintain liquidity and smoothness, the market begins to buy for its own money.
The main functions that performs specialist working for NYSE Following:
1. Spezialist acts as an active intermediary between buyers and sellers. On the floor New York Stock Exchange they gather in close proximity to Specialist and shout their suggestions. In that case,, if the buyer and seller cannot agree on the transaction themselves, specialist will actively seek out other members among the crowd, to provide the best price of the transaction.
2. specialist follows, so that the best buy and sell offers are announced to everything on time Market, so that buyers and sellers can get the best price, currently possible. Ie. he is responsible for maintaining quotes in his stock.
3. specialist is responsible for the execution and accounting of transactions in its stock. If the buyer and the seller have agreed between themselves on the conclusion of the transaction, they inform about it Specialist. He, in turn, enters this transaction into the quote., and at that moment it becomes legal.
4. specialist responsible for determining the opening price of the share. This price may be very different from the previous day's closing price, if for example, before opening market there is any important news about the company. On such a day, a specialist can open a promotion much higher. (Gap Up) or much lower (Gap Down). But he is obliged to find the optimal opening price., Such, which would meet the interests of the majority of sellers and buyers.
5. In duties Specialist it is also necessary to monitor the order of execution of orders that come to it. For this, he holds the so-called Specialist Book (Specialist Book).
6. The specialist is obliged to maintain a smooth and calm price movement stock, and to prevent its sharp jumps. On Market situations often arise, when the balance between buyers and sellers is disturbed. For example, the specialist received a large number Sell Market orders and it does not have the ability to perform them at the expense of existing Buy Limit orders within reasonable price range. In this case, the specialist is obliged to use his own capital in order to balance the market..
In the example above, the specialist will be forced to buy stock for myself. Similarly, if there is an excess of buyers and a lack of sellers, the specialist will be forced to sell his own stock (or sell Short). He is obliged to do this until the price stabilizes., and a new level of balance will not be established between the requests of buyers and sellers. It is very important for us to understand and remember, that in these situations the specialist works like an ordinary trader. He buys and sells stock for your own money, and hopes to close his position with a profit in the future.
Moreover, his task is much more difficult than that of an ordinary trader, since he has to buy when everyone is selling, and sell when everyone wants to buy. For reference, average, to 10% volume of transactions in stock Is specialist.
Trade Rules for a Specialist
IN Specialist there are very good opportunities to make money, since he has the most complete information about all sellers and buyers in his promotion. In order for the specialist not to abuse his position, on NYSE there are a number of rules, restricting its trade.
- specialist can only buy on Downtick but sell only on Uptick.
- specialist not eligible to buy share for himself if he has at this time
customer buy order (similarly for sale). - The specialist does not have the right to carry out a transaction for himself if this transaction
activatesт Quit customer order. - specialist does not have the right to carry out a transaction for himself at the price of the existing
Limit orders client. - After execution Limit orders client, the specialist has the right to buy or
sell Promotionsand for myself at the same price, but no more Shares what did the client get.
Note – insofar as Sell Short is de facto Limit warrant, specialist must
treat him like anyone else Limit warrant. Ie. all restrictions
which impose trading rules on a specialist NYSE applicable in this
Case.
Order Execution Procedure
rules NYSE demand that orders were carried out in a strictly established
sequences. The priority in execution is as follows:
For Market orders – Time – The quantity
– of the two orders, the one that came earlier will be executed first;
– if a specialist received two orders at the same time, the first one will be executed
which is more.
For Limit orders – Price – Time – The quantity
– orders that offer the best price are executed first;
– if a specialist received two orders with the same price, the first to be performed is the one that came earlier;
– if a specialist received two orders with the same price at the same time, the first to be performed is the one that is greater.
Note: by definition SEC, at the same time implies during 30 seconds in a normal market.
Specialist Book
To control the order of execution warrants specialist keeps Specialist Book – Specialist Book. All are entered into this book Limit and Stop orders clients who spezialist cannot perform at this time. specialist does not have the right to enter his own Limit orders. Warrant in Book of the Specialist remains active until it is executed, or canceled by the trader who sent it.
Quotation
specialist is responsible for maintaining quotes in its stock. Ie. he informs Market what are the current best buy and sell prices in its stock.
How A Specialist Makes Money
How do you see?, specialist performs complex and demanding work, and at the same time still risks his money. Naturally, there is a question about compensation for this work. First of all, the specialist earns money on the fact that from each transaction that he carries out, he takes a few cents for himself. – Spread. When there are millions of such transactions, then a significant amount is collected by the end of the day. Let's consider an example from everyday life.
Besides, we already said, what specialist often acts as an ordinary trader, he trades his own money. Since he has the most complete information about sellers and buyers in his promotion, he sometimes has the opportunity to make good money. Let's look at an example.
Finally specialist gets big Market Sell order which the, as he suggests, will be the last. In this case, he can omit Bid on 50 cents or even a dollar, and show the value on the quote Bid – 1 (100 Shares). In this way specialist informs the market that it has a large seller and does not have enough Limit orders for purchase within Spread which he showed. This situation is called Spread down.
Spezialisas if inviting buyers to help him accomplish this Market Sell order, and offers a very good price. In this case, new ones usually appear. Limit orders to purchase. The specialist fulfills the entire order of the seller at a very low price (it won't necessarily be a bid price on 100 shares that he showed). Part of the order he fulfilled at the expense of new buyers, I bought some myself. If he was right in his calculations, and it really was the last big order of the seller, then the stock price will start to rise. The specialist will now be able to sell them at a price much higher than he bought..
How do you see?, and in the first and second cases, the specialist used Spread for
Profit. Remember this.
Spread – specialist's main weapon.
A few words to conclude this section.
SpezialisT NYSE does a very heavy job. Trading volume in many stocks is in the millions a day. But he's a human being just like you.. It happens that he makes mistakes or does not have time to execute orders in time when in stock a big seller or buyer appears. His mistakes cost us traders money., and nothing can be done here. This is the normal risk element of our business.. Therefore, it is foolish to be offended by a specialist if he executed your order at a bad price., even more foolish to be upset about this. Your spoiled mood by the end of the day will cost you much more money than one poorly executed transaction.. We have observed many times the appearance of such “specialist harassment syndrome” for novice traders. It makes it very difficult to concentrate on trading.. Try to avoid it. To begin with, it will be nice if you remember two simple rules.:
The rule 1. The specialist is always right
The rule 2. If the specialist is wrong, see the Rule 1
Another tip for novice traders. Never Trade Against Specialist. There are extreme days, when specialist loses money. But such days are extremely few. On most days, however,, a specialist is the most serious player in his action. That's why, if he buys, You should buy too. If he sells, You sell too. After a while, you will learn to see his work and guess his intentions.. If you trade with a specialist, You will always make money in the market
Shares.
Options for his earnings
- Commission, when a specialist acts as a broker.
- Spreade, working as a dealer.
- Trading, in the event that he spends his money.
Obviously, that a specialist is the best informed about a particular action or about a moment, when the huge order starts to be executed, and he always has the opportunity to gain the appropriate position for the desired stock, and this means that the possibilities of earning his own income increase. But, there is a rule, if there is a stop order at a certain price, the specialist does not have the right to activate it in his favor.
Main functions of a NYSE specialist
- Executes incoming requests from brokers on the floor. He can do it immediately or hold it to the desired price level., which sets broker. It also monitors the correct execution of orders.
- Serves as a catalyst in the bidding process. It means, that he brings buyers and sellers together, in that case, when it might not have happened. This situation is possible, when sellers do not reduce the offered price, at the time, how buyers disagree. Then it is the responsibility of a specialist to correctly influence such a trading process., bringing stock prices to an acceptable level.
- Auctioneer. When the trading session begins, the specialist announces the market price for a specific stock at the auction. It is formed on the ratio of supply and demand. Throughout the day, he accumulates and fixes orders to buy and sell shares.
- Agent, a specialist must carry out all applications, which came from brokers through electronic systems.
- Observer, specialist supports liquidity, that is, it tracks, to ensure that stock trading runs smoothly, without unwanted rough hesitation.
- Provide capital as a dealer, stabilize prices. In a situation, when the mass of buy orders for some time exceeds the mass of sell orders, or vice versa, he is obliged to use the capital of the firm to minimize temporary imbalances and unnecessary price fluctuations. He buys or sells against the trend until supply and demand balance..
This is the most unpleasant rule in their work.. Thanks to this rule, trading is not so risky.
In other words, he just has to do it, at that moment, when no one in the market just wants to do it. Because in this situation, a specialist has a real chance to lose quite a lot of money. Of course, in the near future he will try to return this money to himself. It will turn out to be done, when, as a result of the decline in the share price, there is a sufficiently large buyer, who will be able to reverse the movement of shares up. It is this movement that the specialist will try to maintain at least up to the level of the average value of his unprofitable position..
- Announce the best offer for the moment and for sale to the whole market, and to buy, in other words, this person is responsible for maintaining the quotes of all of his shares.
- Maintains Book limit orders, the so-called closed book. But for an extra charge, you can buy a part Books. It is necessary for a specialist, in order to arrange orders, arrange them in order, helping to properly form the market for specific securities, and quickly fulfill orders, as soon as the market demands it.
A specialist is an employee. Wherein, the work of a specialist is strictly controlled by the exchange itself. And as a rule, one specialist leads one or two shares, well, maximum three.
But in any case, the salary of a specialist depends in direct proportion on the fact, how well will he do his job.
