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What is Affirmative Obligation?

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 Does Affirmative Obligation Work?

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 Does Affirmative Obligation Matter?

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.

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Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.