On a floor to the New York stock exchange 1366 experts work. The majority of them work on one of 7 dealer companies of members NYSE. Each of them supervises trade process in one, taken away to it shares. What expert will be responsible for trade in the concrete share decides Board of directors NYSE. If the expert well consults with the work, it can increase – to allow to trade the share of more prestigious company, with great volume of day trade. If the expert does not consult with the responsibilities, it can lower or even to dismiss. For example, if it infringes upon rules of trade or on it many complaints from clients come. To be the expert, this expensive enough pleasure. To have the right to work as expert NYSE it is necessary to pay at first for “an armchair of the expert”. The price of such armchair reached to 4х millions dollars.
The main task of the expert is support “fair and ordered” the trade market in the share. First of all performance of bargains is meant it under the best price which support minimum Spread on quotations and prevention of too sharp jumps of the share price is possible at present.
Main functions which the expert working on NYSE executes the following:
1. The expert acts in a role of the active intermediary between buyers and
Sellers. On a floor New York stock they gather in immediate proximity from the expert and cry out the offers. In the event that the buyer and the seller cannot agree about the bargain, the expert will actively search for other participants among crowd to ensure the best price of transaction.
2. The expert monitors that the best offers on purchase and sale have been declared in time to all market that buyers and sellers could receive the best price, possible at present. I.e. it is responsible for support of quotations in the share.
3. The expert is responsible for performance and the account of bargains in the share. If the buyer and the seller have agreed among themselves about conclusion of the transaction they inform on it to the expert. That in turn enters this bargain into the quotation, and during this moment it becomes lawful.
4. The expert is responsible for definition of an opening price of the share. This price can differ from the price of closing of a previous day if for example, before hours the market there were any important news about the company hardly. In such day the expert can open the share much more above (Gap Up) or much more low (Gap Down). But he is obliged to find an optimum opening price, such which would be equitable to interests of the majority of sellers and buyers.
5. Into responsibilities of the expert as enters to keep order performances of warrants which to it arrive. For this purpose it keeps the so-called Book of the Expert (Specialist Book).
6. The expert is obliged to support smooth and quiet movement of the share price, and not to suppose its sharp jumps. In the market often there are situations when the balance between buyers and sellers is infringed. For example, the expert has received big Number of Sell Market warrants and it does not have possibility to execute them at the expense of existing Buy Limit warrants in reasonable limits of the prices. In this case the expert is obliged to use the own capital to balance the market. In the example resulted above the expert will be forced to take stock for itself. Similarly, if there will be a surplus of buyers and defect of sellers, the expert will be forced to sell own shares (or to sell Short). He is obliged to do it until then while the price is not stabilised, and new level of balance will not be established between
Inquiries of buyers and sellers. For us it is very important to understand and remember that in these situations the expert works as the ordinary trader. He purchases and sells shares for own money, and hopes in the future to close the item with profit.
Thus its problem is much more difficult than at the ordinary trader as he should purchase when all sell, and to sell when all wish to purchase. For the inquiry, on the average, to 10 % of a volume of transactions in the share it is carried out by the expert.
Rules of Trade for the Expert
expert has very good earnings potentials money as it has the most complete information on all sellers and buyers in the share. That the expert did not abuse the position, on NYSE there is a number corrected, limiting its trade.
1. The expert can purchase only on Downtick and sell only on Uptick.
2. The expert has no right to purchase the share for itself if at it at this time is
The warrant on purchase from the client (it is similar for sale).
3. The expert has no right to handle a transaction for itself if this bargain
Activates Stop the warrant of the client.
4. The expert has no right to handle a transaction for itself at the price of the existing
Limit warrants of the client.
5. After performance Limit of the warrant of the client, the expert has the right to purchase or
To sell shares for itself under the same price, but it is no more shares than the client has received.
The note – as Sell Short is de facto Limit the warrant, the expert is obliged
To address with it just as with any other Limit the warrant. I.e. all restrictions
Which impose on the expert of the rule of trade NYSE are applicable and in it
Order of Performance of Warrants
Rules NYSE require that warrants were executed in strictly established
Sequences. A priority performed by the following:
For Market warrants – Time – Size
From two warrants the first will execute that which has come earlier;
If the expert has received two warrants simultaneously, the first will execute that
Which is more.
For Limit warrants – the Price – Time – Size
First of all warrants which are executed offer the best price;
If the expert has received two warrants with a flat price, the first will execute that which has come earlier;
If the expert has received two warrants with a flat price simultaneously, the first will execute that which more.
The note: by definition SEC, simultaneously means in a current of 30 seconds in the conditions of the normal market.
The book of the Expert
For control of order of performance of warrants the expert keeps the Book of the Expert – Specialist Book. In this book are brought all Limit and Stop which the expert cannot execute the warrant of clients at present. The expert has no right to introduce to it the Limit the warrant. The warrant in the Book of the Expert remains active until then will not be executed yet, or is excellent the trader which it has sent.
The expert is responsible for support of quotations in the share. I.e. he informs the market what at present there are the best prices for purchase and sale in its share.
As the Expert gains Money
As you see, the expert performs difficult and responsible work, and thus still risks the money. Naturally, there is a question on indemnification for this work. First of all the expert earns money for that that from each bargain which it carries out it collects to itself some cents – Spread. When such bargains millions by the end of day the round sum gathers. We will consider on an example from an ordinary life.
Besides, we already said that the expert often acts in a role of the ordinary trader, it trades in own money. As it has the most complete information on sellers and buyers in the share, it sometimes has possibility to earn good money. We will consider on an example.
At last the expert receives big Market Sell the warrant which as he assumes, will be last. In this case it can lower Bid on 50 cents or even dollar, and show on the quotation size Bid – 1 (100 shares). Thus the expert informs the market that it has a big seller and there is no enough Limit of warrants on purchase within Spread which it has shown. Such situation is called Spread down.
The expert as though invites buyers to help it to execute it Market Sell the warrant, and offers very good price. In it a case usually appear new Limit warrants on purchase. The expert executes all order of the seller on a rock-bottom price (it will be not obligatory price Bid for 100 shares which it showed). It has executed the Part order at the expense of new buyers, and a part has purchased itself. If it has appeared the rights in the accounts, and it really was the last big order of the seller the price of shares will start to rise. The expert can sell them now under the price much more above than he purchased.
As you see, both in the first and in the second case the expert used Spread for
Profit earnings. Remember it.
Spread – the main weapon of the expert.
Some words in conclusion of this section. Expert NYSE executes very much a hard work. The volume of trade in many shares is estimated in millions a day. But it the same person as well as you. Happens that it does errors or has not time to execute in time the warrant when in the share there is a big seller or the buyer. Its errors stand to us to traders of money, here again nothing can be done. It is a normal risk element of our business. Therefore silly to take offence at the expert if it has executed your warrant under the bad price, more to be upset about it more silly. Your spoilt mood by the end of day to you will cost much more money than one badly executed bargain. We observed many times occurrence such “a syndrome of prosecution by the expert” at beginning traders. It very much prevents to concentrate on trade. Try to avoid it. It will be to begin with quite good if you remember two simple corrected:
The rule 1. The expert is always right
The rule 2. If the expert is not right look the Rule 1
One more advice for beginning traders. Never trade against the expert. There are extreme days when the expert loses money. But it is not enough such days. In the majority of days, the expert is the most serious player in the share. Therefore, if he purchases, you too should purchase. If he sells, you too sell. After a while you learn to see its work and to guess its intentions. If you trade together with the expert, you will always gain money in the market
() the Fragment from the book of Gerchika