Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Affirmative Obligation

What it is:

An affirmative obligation is a responsibility incumbent upon New York Stock Exchange (NYSE) specialists to ensure that a market for a stock still exists in the absence of sufficient supply or demand.

How it works (Example):

In certain instances, there may be high demand for a stock accompanied by a short supply of shares. Conversely, a preponderance of shares may be accompanied by low demand. In the presence of such circumstances on the NYSE, affirmative obligations mandate that the appropriate specialists purchase shares, in the case of high supply/low demand; and sell shares, in the case of high demand/low supply.

Why it Matters:

Affirmative obligations ensure that the market demand for stocks meets supply and vice-versa. By stepping in to make a market, specialists maintain trading continuity as well as market price stability.