The Specialist

Discussion in 'Order Execution' started by michaelscott, Mar 20, 2007.

  1. I have watched CNBC for many years now and always see those guys on the NYSE floor running around. I never thought to ask what each guy we see does, well, because I never cared. However, I am curious.

    The guy who is typing madly on the keypad is the guy filling the orders, right? What about the guys with the handhelds? What about the setup of the actual posts? Whats the basic setup and how does a guy get a job typing madly away on that any point does he stop to take a break. Is there a place where I can read about all this info just out of curiosity?
  2. anyone know?
  3. Hehe. Im just curious about the basic setup. Ive never been to the floor of the exchange and no one has ever explained it to me. There isnt much reading on the internet. There are some things I know from watching CNBC and word of mouth.

    Im certain the guy typing on the ten-key like machine is the specialist matching the orders. This looks very archaic and somewhat frightful that the future of my money is being determined by an overworked human being. This overworked human being might have gotten drunk the night before or having emotional issues like most of us do on occasion. Certainly some of these guys might even be corrupt and be in the hands of a Jim Cramer like character.

    The guys who run around the floor with the palm pilot type devices probably arrange large orders for institutional clients. How they tie in with the ten-key guy I dont know...

    I dont see the movement on the NYSE floor up to frantic levels like you see in the oil pits. I can imagine the atmosphere is more relaxed on the NYSE.

    Maybe Don Brite can come into this conversation as he was a specialist at the Pacific Exchange. Im certain all these floor type exchanges are very similiar in setup/construction.
  4. Isn't it correct that the specialists not only execute orders but they trade as well?
  5. Yes, that is correct. They have to make a market for the stock. So they will buy to support the price or sell to push it down. Dont know if they can short.
  6. The people you see running around are brokers and clerks, the guys "typing frantically" are usually the Assistant Specialists, the "cool and calm" guys behind the Assistants or next to them, are the actual Specialists. There are fewer brokers and assistants (just happen to have one just join our firm recently, go through training, etc., and is trading with us in Vegas now), due to the advances in technology. The single place market, with Specialist participation, is still alive and well, just with some different rules (hybrid, sweeps, etc.)...but still "over-ride" the electronic markets when necessary.

    All the best,


    go to for more info if you like.

  7. Yes, specialists can also short.

    Generally, specialists provide price/time priority, efficient order representation and play an important role in price formations. They also trade against moving prices and provide liquidity when the spread is wide.
  8. Thank you all for taking the time to respond.

    I do believe the floor staff will be disappearing, but I have one more question. How does one go about getting a job on the floor and what is the level of compensation? I can imagine whoever gets a job on the floor is well-connected and has the resume of gold.

    How do they go about finding a guy that can frantically work the order-matching contraption? There are lots of MBAs and Ivy League educated folks hanging around Wall Street, but how many of them can actually work the contraption?
  9. Math_Wiz


  10. No, this isn't true.

    Specialists do not provide price/time priority. Your order competes with other orders, in the specialist's public limit order book, on the basis of price/time priority. But exchange rules allow a floor broker to bypass the book, and to step in front of your booked order. Exchange rules create various situations in which a newer order is allowed to step in front of an older order, when at least one of those orders is not in the book. Floor brokers have an advantage over the suckers (you) who are trading without having a physical presence or floor broker at the exchange. Specialists also violate federal securities laws and exchange rules, in such a way as to circumvent price/time priority even when it does apply, and in many other ways, as part of an ongoing criminal enterprise.

    NYSE (or AMEX) order representation, and their trading generally, are not efficient. They are exactly the opposite.

    Specialists provide liquidity, but they aso interfere with competitors who would otherwise provide liquidity at better prices than do the specialists. Specialists, by interfering with competing liquidity providers, cause spreads to be wide. Specialists, by displaying false quotes, cause spreads to appear to be narrower than they are in reality. The displayed quote is often better than the price you will actually receive if your order executes at the same time the false quote was displayed.

    The specialist system burdens the financial system with an unnecessary system of corruption and private taxation, tends to weaken confidence in financial markets, and threatens the foundations of capitalism. The government has been changing its laws in order to reduce the amount of protection and unfair advantage given to specialists by federal securities laws.
    #10     Mar 25, 2007