What is an Off-Floor Order?
An off-floor order is an investor's request to a broker to buy or sell securities.
How Does an Off-Floor Order Work?
An off-floor order is what many consider a typical order transaction. For example, let's say John wants to sell 100 shares of Company XYZ, which is listed on the New York Stock Exchange (NYSE). He calls his broker and tells her to sell the shares. Because John's broker does not physically work on the trading floor of the NYSE, the order is considered an off-floor order.
Often, the specialists who work on the floor of the NYSE will buy and sell shares for their own accounts. These orders are called on-floor orders, because both parties to the transaction are present on the actual trading floor.
Why Does an Off-Floor Order Matter?
Trading rules require exchanges to execute off-floor orders ahead of on-floor orders. This is because on-floor orders typically involve specialists trading for their own house accounts rather than for customers. Though on-floor orders are perfectly legal and are in fact very important in providing liquidity and rapid execution to the markets, the primary role of a specialist and most other trading floor personnel is to facilitate customer trades, and they therefore must put those interests ahead of their own.