Negative obligation

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Negative obligation

A New York Stock Exchange rule that governs the behavior of specialists. Negative obligation is the mandate of the specialists not trade for the specialist's firm's own account when enough public investor orders exist to match up naturally -- without intervention. An example of violating negative obligation is Trading Ahead. Also see positive obligation.

Negative Obligation

New York Stock Exchange requirements on its specialists. The negative obligation forbids specialists from trading on their own accounts when enough matching orders exist to ensure a two-sided market. That is, when investors do not need a specialist to provide liquidity to the market, the negative obligation prohibits the specialist from trading on its own account. See also: Positive obligation.