Specialist Firm

Categories: Trading

Basically, a company that employs specialists. But not just any specialists (a firm that employs Space Shuttle Payload Specialists isn't what we'd refer to here as a "specialist firm"). These specialists have to do with the stock market.

The NYSE uses specialists to maintain market liquidity for the stocks that trade on its exchange. Each specialist has a stock they're responsible for. They act as middlemen for transactions, facilitating the buying and selling of shares.

The specialists also hold a certain amount of shares in reserve (an inventory maintained by the specialist) to use when the buy side or sell side get a little skimpy. If there aren't enough people on a certain side of the transaction (not enough buyers or not enough sellers), the specialist will dip into its shares to keep the market humming.

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Finance: What is a Specialist?6 Views

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Finance allah shmoop what is a specialist I wouldn't have

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a movie stallone wait different kind of specialist in finance

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land a specialist is the gala guy trading in a

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given stock that is there a member of a stock

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exchange and they might carry inventory of satan Ten million

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shares of microsoft trading currently at around forty bucks a

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share their offering msft for sale at forty point Oh

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five and they're our buyer of msft this moment at

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thirty nine ninety one and see there's a fourteen cents

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a share spread their meaning that they make fourteen cents

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every time they transact So let's say that specialist sells

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a million shares of microsoft today earning a fourteen cents

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spread per share while fourteen cents times a million one

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hundred forty grand and clown Nice payday for one day's

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work so that's a pretty widespread in the scheme of

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things because often brokers have to tack on their own

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commission of a few cents on either side and the

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specialist might in fact be dealing from their inventory to

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brokers on both sides of a transaction in which case

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they're spread I even spread to the actual specialist might

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Be just a few cents times those million shares like

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four cents times a million gets to forty grand Something

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like that It's still a really good living but if

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it's so good then why don't millions of people fight

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for that job Like how hard is it tio Just

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nod your head and right down buy or sell and

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then a number you think everyone who flips burgers at

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mcdonald's and is afraid of robots taking their jobs would

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be killing for this gig Well in order to be

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a spy specialist not only do you need you know

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special education and a few siri's license exams but you

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also need capital with which to buy inventory risky inventory

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which you'll hold as if they are casino chips and

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you are more or less the house So when the

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microsoft shares example just to be a specialist in that

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one stock well you have to raise something like one

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hundred million dollars because you'll have to go into the

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market to start and simply by two or three and

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call two and a half million shares at around forty

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bucks each for a total cost of a condo or

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a silicon valley unit that's What a units called out

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here and yes that's an investment and the stock could

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go up but it could go down as well leaving

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you holding a big fat smoldering bag of dog craft

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dot com and also going whoever your investors or creditors

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workout hundred million dollars Like if microsoft has kind of

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evaporated you know what could happen More risks will hunt

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your sleep in that the stock and suddenly gap down

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three dollars on a bad quarter at which point your

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spreads must widen to accommodate expected further volatility in the

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stock And you then compete with other specialists who also

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make a market in microsoft Well at any given time

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they may want to get out of trading in it

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and undercut you Buy a penny or two a share

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leaving you as the sole big owner of what will

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feel like a stock version of the titanic Well the

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math gets complex is the market gets volatile specialists use

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hedges and human beings end up competing against a i'd

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driven black box computers But the reason you exist as

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a specialist or rather the key job or responsibility of

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the specialist is to provide liquidity That is you have

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to buy and sell shares to accommodate the market that's

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your job and in volatile markets It means that they

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might run out of inventory or be squeezed and have

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to buy shares at much higher or sell shares at

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much lower prices than their cost But that's the risk

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you take when you become a specialist they must execute

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on these trades and if they don't they lose their

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c This is specialist on the exchange altogether and are

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more or less fully out of work And you know

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i don't know working for uber lift or something next

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Yeah and at that point well they might be willing 00:03:58.973 --> [endTime] Tio take just about anything for a ride

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