Exchange Fact Book, 1999.   limit-buy at $30. As market buys and sells come to the floor randomly, the stock price would fluctuate between $30 and $32. The exchange would consider this excessive volatil- ity, and the specialist would be expected to step in with bid and/or asked prices between these values to reduce the bid-asked spread to an acceptable level, typically less than $.25. Specialists earn income both from commissions for acting as brokers for orders and from the spread between the bid and asked prices at which they buy and sell securities. Some be- lieve that specialists access to their book of limit orders gives them unique knowledge about the probable direction of price movement over short periods of time. For example, suppose the specialist sees that a stock now selling for $45 has limit-buy orders for more than 100,000 shares at prices ranging from $44.50 to $44.75. This latent buying demand provides a cushion of support, because it is unlikely that enough sell pressure could come in during the next few hours to cause the price to drop below $44.50. If there are very few limit-sell orders above $45, some transient buying demand could raise the price substan- tially. The specialist in such circumstances realizes that a position in the stock offers little downside risk and substantial upside potential. Such immediate access to the trading inten- tions of other market participants seems to allow a specialist to earn substantial profits on personal transactions. One can easily overestimate such advantages, however, because ever more of the large orders are negotiated "upstairs," that is, as fourth-market deals.   Block Sales   Institutional investors frequently trade blocks of several thousand shares of stock. Table 3.6 shows that block transactions of over 10,000 shares now account for about half of all trad- ing on the NYSE. Although a 10,000-share trade is considered commonplace today, large blocks often cannot be handled comfortably by specialists who do not wish to hold very large amounts of stock in their inventory. For example, one huge block transaction in terms of dollar value in 1999 was for $1.6 billion of shares in United Parcel Service. In response to this problem, "block houses" have evolved to aid in the placement of block trades. Block houses are brokerage firms that help to find potential buyers or sellers of large block trades. Once a trader has been located, the block is sent to the exchange floor, where the trade is executed by the specialist. If such traders cannot be identified, the block house might purchase all or part of a block sale for its own account. The broker then can resell the shares to the public.   The SuperDOT System   SuperDOT enables exchange members to send orders directly to the specialist over computer lines. The largest market order that can be handled is 30,099 shares. In 1999,