NYSE and Market Specialists
The New York Stock Exchange is imagined by most people as a nosy place with a lot of people screaming at each other meaningless for the common citizen numbers. The NYSE is the oldest stock exchange in the US.
When most people hear about the NYSE they make an association with the Wall Street.
Another well known stock exchange is the NASDAQ, which compared to the NYSE has no physical location.
This is not the only difference between the NASDAQ and the NYSE. The prices at NASDAQ are negotiated, which classifies it as a negotiated market. On the other hand, the prices at the NYSE are set by auction.
The key role in NASDAQ is played by a market maker, whereas in the NYSE it is allocated for a specialist, who is a market professional part of a specialist firm. The responsibilities of the latter include the establishment of a market in a specific stock.
The specialist has the same responsibilities as an auctioneer. This means that s/he has to put an order in the market. Additionally, s/he has the responsibility of placing the best buy and sell orders at a top position.
The specialist's work is not that simple since s/he is also responsible for the maintenance of the balance on the market. This means that if there is some kind of imbalance, the specialist should fix it. There are cases in which this required the selling and buying against the market by using the resources of the specialist firm.
The specialist is not responsible for the setting of the price itself. All s/he has to do is to link the best price to the corresponding stock.
The specialist has some rights concerning the stock price setting. These include the adjustment of the opening price under specific circumstances and the termination of the trading if order imbalances are at place.
Specialists serve as intermediaries that match buyers with sellers with the prices that are most beneficial for them.
The maintenance of the extremely large number of transactions that are executed each day in the NYSE will not be possible without the support of a sophisticated trading network. No human being is capable of keeping track of the large volumes of transactions.
The financial award for the well done work for the specialist is the spread. This is the difference between the bid and the ask price. Other sources of income include the execution of trades from their own accounts or that of their firm.
Finally, through the activities of the specialist in the NYSE, investors are guaranteed that they will receive the best price for a stock at the time of the transaction. This is so since specialists match the best price that can be obtained for a specific stock.
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