Posted in Finance, Accounting and Economics Terms, Total Reads: 639
Definition: Specialist Unit
A specialist unit acts as both the principal and the agent for brokers and maintains a stable market in a given security. It refers to a collection of firms that typically act as a market developer for one or many stocks that are trading on any given exchange.
While acting as a principal, the specialist unit generally holds its own inventory of stock. This is done by the specialist unit mainly to facilitate the liquidity for a given trade. Also, to maintain the liquidity specialist units generally post narrow bid-ask spreads, manage limit orders and large block orders.
Specialist unit also bring balance in the market by a simple principle. They take the opposite side of any bullish or bearish sentiment for any given stock by trading out of its own inventory.
A specialist can be also called an entity that is authorized by an exchange to act as both broker and principal for all the other brokers in maintenance of a stable market for one or more particular securities.