6.15.2005

Q&A: List 3 different exchange memberships.

A
  • a Registered trader is one who trades on his own account
  • a Floor broker transacts for others
  • a Commission broker trades for her/his firm, and
  • a Specialist makes a market in specific securities.

Bonus Points

  • Specialists maintain a market in one or more listed securities, with two major functions
    • Serve as a broker to match buy and sell orders and to handle special limit orders placed with member brokers.
    • Act as a dealer to maintain a fair and orderly market by dealing personally in the stock. Provides liquidity to the market by standing ready to trade at quoted bid and asked prices. For example, if there is an inadequate flow of orders, specialists buy and sell shares for their own accounts to narrow the bid ask spread and improve the price continuity.
  • The specialist derives income from the broker (commissions) and the dealer (spread between the bid and asked prices at which they buy and sell securities) functions. It also appears that specialists' access to their book of limit orders gives them unique knowledge about the probable direction of price movement over short period of time.

Category: C++ Quant > Financial Markets

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