Negative Obligation

Negative Obligation

An obligation of NYSE specialists to remain on the sidelines and refrain from acting as principal when there is sufficient market demand and supply to efficiently match orders.

Notes:

The negative obligation ensures that specialists are not getting involved in the market on their own behalf when the market is able to "make itself" and sufficiently match buyers with sellers. This obligation on the specialists provides the public with the opportunity to transact with each other without specialist intervention.

See also: Affirmative Obligation, NYSE, Principal, Specialist, Trading Ahead

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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.