The New York Stock Exchange -- What It Is and How It Works

The New York Stock Exchange, or NYSE, has an interesting history dating back as far as 1792. Here, we briefly discuss what the NYSE does and how it evolved over the last two hundred years.

What is the NYSE?

The NYSE is one of the three main American Stock Exchanges located at 11 Wall Street in lower Manhattan, New York, USA. In terms of market capitalization (the dollar value you arrive at when you multiply each listed stock by the number of outstanding shares), it is the largest stock exchange in the world.

The NYSE is operated by NYSE Euronext -- a company formed in 2007 when NYSE Group Inc. merged with Euronext N.V.

Highlights of the NYSE Journey from 1792 to Today.....

The New York Stock Exchange started humbly in 1792 when a group of twenty-four stock brokers outside 68 Wall Street in New York signed an agreement to trade with each other under a Buttonwood tree. In the last two hundred years the NYSE has had a rich, historical journey to its current state.

To view this fascinating time line, Click Here.

How does the NYSE Work?

The NYSE uses a Hybrid Market Concept for trading. This combines both electronic trading and traditional, auction market trading. Buyers and sellers meet directly in a fair, open and orderly market to compete for the best possible price dictated by supply and demand.

The SuperDOT® is the NYSE's electronic order-routing system. NYSE member firms use this system to transmit trading orders directly to the trading post where the security is traded or to the member firm’s booth.

At the NYSE an Exchange-issued trading license is required to be able to trade securities on the Trading Floor. Only qualified and approved NYSE broker-dealer entities may acquire and hold trading licenses.

Most of those holders are either floor brokers or specialists:

• Floor Brokers -- These are stock brokers who represent public orders to buy or sell shares. Their goal is to work to get their customers the best price. Brokers participate both in person and electronically on the Trading Floor and have advanced tools to assist them in handling trades on behalf of their clients.

  Two main types of floor brokers work on the Trading Floor -- house brokers and independent brokers.

  House brokers are employed by brokerage firms that hold accounts for public investors. These market professionals buy and sell securities as an agent for their customers.

  The majority of independent brokers are “direct access” brokers who deal with institutional investors at low commission rates.

• Specialists. Each stock listed on the NYSE is allocated to a specialist, a market professional who acts as the contact point between brokers with orders to buy shares and brokers with orders to sell shares.

Companies Traded on the New York Stock Exchange...

As of Dec. 31, 2008, NYSE Euronext has around 8,500 listings globally. Some popular U.S. companies on this exchange are...

In summary, the New York Stock Exchange is one of the oldest exchanges in the U.S. From its beginnings in 1792 it has enjoyed a colorful history and has been a pillar of the U.S. Stock Market. The NYSE still uses the traditional Trading Floor supplemented by it's SuperDOT® electronic order-routing system.

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