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When there is not enough outside interest the specialist is required to step in and provide liquidity for the market from his own account. His job is to maintain a fair and orderly market, and for the most part these professionals do a very good job of doing that. Your order is sent in via SuperDOT directly to the specialist or your brokerage firms trading floor booth. The order will then be matched with an offsetting order(s).

When you enter an order on the NYSE it will go to the specialists book if it is not tradable right away. Once in the book your priority is determined A) by the amount of time the order has been in (first come, first serve) and 2) by size of the order (larger orders have priority).

I find that when trading NYSE stocks I am generally able to get filled at better prices when trading size. It is also possible to get to know the "personality" of a specific specialist (it is after all one person), and many of the most successful professional scalpers specialize in a few NYSE issues using their knowledge of the particular specialist.

The National Association of Security Dealers Automated Quotation service (NASDAQ) is a computerized network that handles the quotation and exchange of Over the Counter (OTC) securities. It is a negotiated market where the brokerage firms negotiate trade prices directly with each other and through ECN's.

Just like a specialist is charged with providing liquidity on the NYSE, a Market Maker serves that function on the NASDAQ. Market Makers are brokerage firms acting as a dealer on behave of themselves. Each stock has representation from several firms who maintain its market.

The Electronic Communications Networks (ECNs) are relatively new, having grown out of SOES. They allow the individual trader to act in a manner similar to the market makers and interact directly with each other as agents, and not through dealers. Traders can post bids and asks directly to the Nasdaq system and have them broadcast to the entire system rather then have to go through a Market Maker. Some of the major ECNs are INCA (Instinet) ISLD (Island) and ARCA (Archipelago).

                                           

     

DISCLAIMER: Trading in securities may not be suitable for all individuals. Consult your broker or other professional to determine
your suitability. The discussions provided by Trading From Main Street are for educational purposes only and should not be taken
as a recommendation to buy or sell the referenced security. Past performance is not indicative of future results.

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