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Controlling Stock Market Traffic

June 4, 2015 by · Leave a Comment 

By Phineas Upham

A stock exchange can be a physical location, or a network of computers, but it is designed to help facilitate the buying and selling of equities. If transactions were limited to just a few dozen, this would be a relatively simple affair. Thanks to technology, there are now untold numbers of transactions going on at any given moment that the markets are open. Traffic controllers are necessary in order to process those orders in a timely fashion, and to keep market activity going when no one is interested in buying or selling stock.

The Role of Traffic Controllers

Markets have intersections, just like roadways. And just like roadways, intersections can become congested when problems present themselves. In NASDAQ, the traffic controller is the seller. The seller is what’s known as a “market maker”. They help facilitate a transaction between a buyer and seller. They establish the flow for trading, and activity essentially halts if they aren’t able to locate buyers and sellers.

To get a bit more technical, market makers literally make a market for securities. This contrasts a specialist, whose role is merely to facilitate the transaction. When the transactions become clogged, traffic controllers have a duty to try and keep things moving. They will often step in and help match bidders to sellers at the proper prices if necessary.

Another job that these controllers have is making sure that activity continues. If they cannot find buyers and sellers, then the controllers will sell from their own inventories.

Phineas Upham is an investor from NYC and SF. You may contact Phin on his Phineas Upham website or Facebook page.