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Definition: Specialist Short Sale Ratio
A specialist is a member of New York Stock Exchange who matches buy and sell orders and facilitates trading as well as promotion of liquidity on the exchange. The Specialist short sale ratio indicates the number of short sales being done by specialists relative to the entire market.
Specialists improve market efficiency by matching supply and demand. A specialist also trades on the market depending on presence of buy and sell imbalances. The ratio of short sales done by specialists to that of the total short sales done by all participants of the market is given by the specialist short sale ratio.
Specialist Short Sale Ratio = Short sale by specialists / Short sales by all market participants
As specialists possess an informational advantage over regular traders, specialist short sale ratio is seen as an indicator of market sentiment. When specialist short sale ratio tends to be low, the market sentiment is bullish. Whereas, when specialist short sale ratio tends to be high, the market sentiment is bearish.
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