How much does a specialist make??

jpomerenke · Jan 8, 2003

does anyone know what the average specialists makes in a year??

nitro · Jan 8, 2003

Quote from ari_veru:

NYSE Member Firms Report Third-Quarter 2002 Results

NEW YORK, Nov. 27, 2002 -- New York Stock Exchange member firms that conduct business with the public reported third-quarter 2002 after-tax profits of $564 million and revenues of $35.62 billion, a 39.3 percent increase and 18.4 percent decline, respectively, compared to $405 million in after-tax profits on revenues of $43.64 billion in third-quarter 2001. In the first nine months of 2002, the firms reported after-tax profits of $3.82 billion on revenues of $113.17 billion, compared with $4.93 billion on revenues of $152.50 billion in the first nine months of 2001.
For third-quarter 2002, NYSE specialists reported after-tax profits of $107 million, an 87.7 percent increase from the year-ago quarter's $57 million. Total specialist revenue grew by 26.8 percent in third-quarter 2002, to $440 million, from $347 million in third-quarter 2001. In the first nine months of 2002, specialists reported after-tax profits of $291 million on revenues of $1.24 billion, compared to after tax-profits of $310 million on revenues of $1.32 billion in the first nine months of 2001.

from nyse.com
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This doesn't say what the spec makes, but the spec firms.

I have heard between 300K to 1M+ for the top tier. This is "second hand" information though...

nitro

Tea · Jan 8, 2003

The figure to watch is what % return do they make on their equity. I've heard its around 60%.

Now a wild and crazy hedge fund that takes big risks might make 30-40%.

Perhaps the reward that the specialists make is a bit too rich for the risk that they really take.

chasinfla · Jan 8, 2003

i hear from the floor that it's not the 90's for them anymore, either.

lescor · Jan 8, 2003

This was from a couple years ago, but I heard that a 'good' specialist could make $100k a month in specialist handling fees alone. This is when they charge you an extra penny a share for orders in the market 5 minutes or more.

jpomerenke · Jan 9, 2003

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TM_Direct · Jan 9, 2003

I had a trader who was a floor specialist since the 70's....back then he handled dupont or georgia pacific ( i can't recall)...it was a well known firm and his exact quote to me was: "from 1972 to 1985 if you bought or sold it i made an 1/8th of a point on every share".....needles to say he retired young.

on the other hand, he also had to make markets if there was none...ie. give up an 1/8th to keep everything orderly.

I think decimalization and the emergence of third markets has crimped their huge profits but the bottom line is they still do very very well.

alanm · Jan 10, 2003

Sometimes, I wonder how they do it.

I was trading GD the other day (an $80 stock) during the first hour, and it was wandering around a 25 cent range, with a 0.05-0.15 spread for long periods of time, printing a couple hundred now and then. Before decimalization, that range would have been a buck, probably with a 0.50 spread.

I'm guessing that they make most of their money at the open and at the close. Kind of like no-limit poker - "hours of boredom, punctuated by moments of terror".

TM_Direct · Jan 10, 2003

you are correct....as this one former specialist once told me.."it was like printing f#ing money every day!!"

but with the decimals it's a much tighter spread, BUT they are not starving...remember this: In 1970's and 1980's volume on the entire exchange for a particular stock is probably traded in a day now....I remember one old timer telling me that MSFT volume today exceeded the TOTAL volume of the EXCHANGE in 1970 something.....think about it: would you want 1/8th on 100,000 shares or 1 cent on 50 million shares?

bungrider · Jan 10, 2003

Quote from TM_Direct:

I had a trader who was a floor specialist since the 70's....back then he handled dupont or georgia pacific ( i can't recall)...it was a well known firm and his exact quote to me was: "from 1972 to 1985 if you bought or sold it i made an 1/8th of a point on every share".....needles to say he retired young.
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with ECNs being able to trade (and price improve) listed spreads, there's no reason - no #@#!$ reason - why anyone with sufficient capital couldn't be an off-floor specialist. you can make 1/8 point for every share traded as well, provided you know when to cut losses and all that other crap that goes with being a good trader....