Stock exchange - overview, purpose, and examples

Нью-Йоркская биржа сегодня

В XXI веке NYSE остается № 1 в мире. В 2006 г. произошло слияние Нью-Йоркской с электронной биржей Archipelago Holdings и образование NYSE Group, которая выпустила собственные акции.

В 2007 г. NYSE выходит на европейский рынок и объединяется с Euronext, создается NYSE Euronext. Но уже в 2012 г. эту объединенную межконтинентальную корпорацию поглощает международная сеть ICE.

Сегодня Нью-Йоркская биржа ведет торги, в основном онлайн. Офис с брокерами по-прежнему существует, но в нем больше нет толпы возбужденных людей, которые что-то кричат и рвут на себе волосы. Главная функция – это обеспечение справедливых торгов различными инструментами для перераспределения финансовых ресурсов в экономике.

NYSE сегодня – это:

Абсолютная прозрачность сделок. Через приложения можно отслеживать действия трейдеров.
Строгий контроль. Главный контролирующий орган в лице Комиссии по ценным бумагам и биржам.
Защита инвестора. Обязательное страхование брокерских счетов.
Высокий уровень информатизации. Торговля может вестись практически круглосуточно, а сделки заключаются за доли секунды.
Автоматическое выключение. Для снижения риска обвала котировок разработана система, когда торги прекращаются на короткое время, чтобы инвесторы смогли обдумать ситуацию и принять более взвешенное решение.

Время работы: с понедельника по пятницу с 9:30 до 16:00 (время Нью-Йорка). По московскому – с 16:30 до 23:00. Не работает 9 дней в году. Конкретные нерабочие дни на 3 года вперед можно посмотреть на официальном сайте nyse.com.

В состав Нью-Йоркской биржи входят следующие торговые площадки:

NYSE – основная биржевая площадка;
NYSE American – торговля компаниями малой капитализации;
NYSE Arca Equites – торговля ETF;
NYSE American Options – торговля опционами на акции малой капитализации;
NYSE Arca Options – торговля опционами на ETF;
NYSE Bonds – торговля облигациями.

На Нью-Йоркской бирже торгуется более 4 тысяч компаний, преимущественно американских. По всему миру известны такие имена, как AT&T, Boeing, Coca-Cola, General Electric, Johnson & Johnson, McDonald’s, Microsoft, Walt Disney и др. Топ-10 компаний по капитализации на изображении ниже.

Ценные бумаги иностранных компаний тоже могут попасть в листинг, если будут соответствовать требованиям:

Доход за последний год – не ниже 2,7 млн $.
Прибыль за 2 предыдущих года – не ниже 3 млн $.
Минимальное количество акций в публичном владении – 1,1 млн $. Минимум 2 000 акционеров должны иметь по 100 и более акций.
Чистая стоимость материальных активов – от 18 млн $.
За последние полгода средний объем торгов в месяц не должен опускаться ниже 100 тыс. $.

Акции российских компаний представлены на NYSE в виде депозитарных расписок. В 2021 г. это МТС и Мечел.

Инвестиционный ликбез

Депозитарная расписка – это ценная бумага, которая закрепляет право на владение акцией или облигацией, торгуемой на иностранной бирже. Смысл введения таких бумаг в том, чтобы инвесторы смогли купить акцию российской компании, которая торгуется на Московской бирже. При этом американские инвесторы покупают их на своей родной бирже. Россиянин тоже может купить, например, акции МТС на Мосбирже и депозитарную расписку МТС на NYSE.

GOVERNANCE

The organizational structures commonly found for exchanges are: nonprofit, the consumer cooperative, and for-profit. Historically, most exchanges have been non-profit organizations, but since the 1990s, there have been trends toward incorporating an exchange as a for-profit organization. Ten such demutualizations globally are listed in Ian Domowitz and Benn Stell’s article, «Automation, Trading Costs, and the Structure of the Securities Trading Industry» (1999), and such initiatives are under investigation by many traditional exchanges, including NASDAQ and the NYSE. The NYSE approved its intention of becoming a publicly traded entity after its merger with the Archipelago exchange as of early 2006. (The merger was approved in December 2005.) Archipelago is an electronic trading platform that owns the Pacific Stock Exchange. Shares of the merged company, to be known as NYSE Group Inc., will trade on the exchange’s board under the NYX symbol. There is uncertainty about what changes will be made in the traditional process of buying and selling securities at the NYSE as a result of the merger.

Increased competition between exchanges forces the change in ownership structure. This is the view of the exchange services industry, as well. The industry argument is simply that a corporate structure with a profit motive enables faster initiatives in response to competitive advances than a committee- and voting-oriented membership organization. Efforts for mergers and acquisitions among several stock exchanges throughout the globe were in process as of the end of 2005.

Changes in the contractual relationship between exchanges and listing companies might outweigh competition as a force behind the shift from cooperative to corporate ownership arrangements. The long-term mutual dependency between companies and exchanges no longer exists, and market makers do not make firm-specific investments that might be fostered under a cooperative umbrella.

The third view is that communications and computerized execution technology permit and encourage the change in governance structure. Traditional exchanges are limited by floor space, and access is rationed through the sale of limited memberships. In an automated auction, there are no barriers to providing unlimited direct access with a transactions-fee pricing structure, which in turn lends itself to corporate for-profit operations. All examples of the change in governance begin with a conversion from floor-trading technology to automated-trade execution. For trade-execution services with no prior history of cooperative governance structure, the mutual structure is routinely avoided in favor of a for-profit joint-stock corporation.

One important aspect of the exchange’s governance in the United States is the concept of self-regulation, a concept that highlights the American approach to the regulation of securities and futures markets. As a self-regulating organization it is subject to constraints with regard to its governance structure. The Securities Exchange Act imposes four major obligations on exchanges: a fair representation of its members in the selection of directors; one or more directors representing issuers and investors who are not associated with members of the exchange; subject to some exception, only brokers and dealers may become members; and its rules are designed to protect investors and the public interest.

How to Buy Stocks on a Stock Exchange

Opening an online brokerage account lets you get started buying and selling securities listed on leading stock exchanges. If you want more personalized advice and guidance, you can select a financial advisor as your stock broker, or you can opt for a full-service brokerage firm.

Whichever model you choose, your broker will transmit buy and sell orders to the broker-dealers who trade on a stock exchange. They always attempt to find a buyer or seller who can meet the price you’ve specified in your order, although it may take more or less time to fill your order depending on the relative levels of market liquidity.

Not sure what stocks or exchanges to choose? Consider investing your money with a robo-advisor. Robo-advisors use your financial goals and risk tolerance to come up with an investment strategy for you and automate the process.

Ownership[]

Stock exchanges originated as mutual organizations, owned by its member stock brokers. There has been a recent trend for stock exchanges to demutualize, where the members sell their shares in an initial public offering. In this way the mutual organization becomes a corporation, with shares that are listed on a stock exchange. Examples are Australian Securities Exchange (1998), Euronext (merged with New York Stock Exchange), NASDAQ (2002), the New York Stock Exchange (2005), Bolsas y Mercados Españoles, and the São Paulo Stock Exchange (2007).
The Shenzhen and Shanghai stock exchanges can been characterized as quasi-state institutions insofar as they were created by government bodies in China and their leading personnel are directly appointed by the China Securities Regulatory Commission.
Another example is Tashkent republican stock exchange (Uzbekistan) established in 1994, three years after collapse of Soviet Union, mainly owned by state but has a form of a public corporation (joint stock company). According to an Uzbek government decision (March 2012) 25 percent minus one share of Tashkent stock exchange is expected to be sold to Korea Exchange(KRX)in 2014.<www.uzse.uz>

Stock Exchanges FAQs

What Are the 3 Major Stock Exchanges in the U.S.?

The New York Stock Exchange (NYSE) is the largest stock exchange in the U.S. and the world by market capitalization. The NASDAQ is the second-largest stock exchange in the U.S. while the American Stock Exchange, which is now known as NYSE Amex Equities after the acquisition by NYSE Euronext in 2008, is the third-largest in the U.S.

What Is the Difference Between Stock Exchange and Stock Market?

A stock exchange is a marketplace or the infrastructure that facilitates equity trading. On the other hand, a stock market is an umbrella term representing all of the stocks that trade in a particular region or country. A stock market is often represented as an index or grouping of various stocks such as the S&P 500.

What Is the Purpose of a Stock Exchange?

A stock exchange brings companies and investors together. A stock exchange helps companies raise capital or money by issuing equity shares to be sold to investors. The companies invest those funds back into their business, and investors, ideally, earn a profit from their investment in those companies.

COMPETITION

Exchanges have two clienteles: companies, which list their shares, and investors, who trade on the exchange. Historically, the product (a listing service) offered to companies was a bundle, consisting of (1) liquidity, (2) monitoring of trading against forms of fraud, (3) standard-form rules of trading, (4) a signal that a listing firm’s stock is of high quality, and (5) a clearing function to ensure timely payment and delivery of shares. The product offered to investors consists of a combination of liquidity and pricing information, as well as any benefits accruing to the investor from the bundle offered to companies.

Government regulation and increased competition from automated-trading systems lessen the importance of exchange monitoring and standardized rules. Technological advances in information processing allow better signals about company quality than simple listings, permit wide distribution of pricing information outside exchanges, and enable separation of the clearing function from other exchange operations. The result is that exchanges now compete solely along the dimensions of liquidity and cost of trading.

Competition through liquidity and cost has led to increased automation of the exchange trade-execution process. Automated exchanges are less costly to build and operate, and provide lower-cost trade execution. Liquidity is enhanced by the ability to establish wide networks of traders through communications systems with an automated-execution system at the nexus. The drive for increased liquidity through computerization has led to new developments in the structure of the exchange services industry, most notably including mergers and alliances between automated exchanges for increased order flow.

Communications technology and the computerization of trade execution have also globalized trading. The physical location and boundaries of an exchange floor are no longer important to traders. A company does not need to be listed, or even traded, on a domestic exchange. Not only are there many possible execution services providers, but electronic exchanges place their own terminals on foreign soil, allowing direct access to overseas listings, regardless of the nationality of the companies involved.

TRADING SYSTEMS

Trading markets may be defined as systems consisting of an order-routing system, an information network, and a trade-execution mechanism. A trading system is a communications technology for passing allowable messages between traders, together with a set of rules that transform traders’ messages into transaction prices and allocations of quantities of stock among market participants.

In the United States, the Securities Exchange Act of 1934, the primary legislation covering the securities markets, undertook to update the regulatory requirements for the buying and selling of securities. After the exposure of a concept release in May 1997 to gather ideas from interested parties, final rules effective as of April 1, 2000, were adopted. The regulations for alternative trading systems were promulgated to strengthen the public markets for securities, while encouraging innovative new markets. These new regulations more effectively integrated the growing number of alternative trading systems into the national market system, accommodated the registration of proprietary alternative trading systems as exchanges, and provided an opportunity for registered exchanges to better compete with alternative trading systems.

Exchanges may offer more than one trading system. Types of trading systems are sometimes differentiated by the form of market intermediation provided by entities with direct access to the system. The nature of competition between exchanges is a defining feature, since exchanges may adopt varying market structures in order to compete in different fashions. A stock exchange is a business entity, and the form of its governance arrangements is important in understanding its nature and conduct.

The nature of allowable messages varies with the trading system’s (exchange’s) rules and technology. A typical message consists of an offer to buy, or to sell, a given number of shares at a certain price. The New York Stock Exchange (NYSE), for example, permits such messages, as well as orders, to buy some amount of stock at current market prices.

The transformation of messages and information from the system into a price and a set of quantity allocations is governed by another set of rules. In open outcry auctions, bids and offers are orally exchanged by traders standing in a single physical location. The acceptance of a bid or offer by another trader generates a transaction. In dealer systems, such as NASDAQ, dealers accept orders by telephone or computerized routing, and transact at prices they themselves set. In batch auctions, such as that of the Arizona Stock Exchange, price is set by maximizing trading volume, given order submission at the time of the auction. In most computerized markets, traders submit orders to a central limit order book, and a mathematical algorithm determines prices and quantities. Examples include the CAC system of the Paris Bourse and the OM system of the Stockholm Stock Exchange.

Investment Methods

Investors can invest in a stock exchange of India through these two ways –

Primary market – This market creates securities and acts as a platform where firms float their new stock options and bonds for the general public to acquire. It is where companies enlist their shares for the first time.
Secondary market – The secondary market is also known as the stock market; it acts as a trading platform for investors. Here, investors trade in securities without involving the companies who issued them in the first place with the help of brokers. This market is further broken down into – auction market and dealer market.

What Is a Stock Exchange?

A stock exchange is just as likely to be a physical space as a virtual one because these highly regulated institutions are now dominated by electronic trading.

The listed stock exchanges in the United States are the New York Stock Exchange (NYSE) and the Nasdaq. The NYSE is at the top threshold and requires companies to maintain a share price of at least $4.

The Nasdaq was the first electronic exchange allowing investors to buy and sell stock electronically, without a trading floor. Companies that are selling shares to the public market for the first time with an Initial Public Offering (IPO) are most likely to use the Nasdaq. The letters are an abbreviation for the National Association of Securities Dealers Automated Quotations.

If a stock does not trade on a listed exchange, it can still trade in the over-the-counter (OTC) market, which is a less formal and less regulated venue.

These OTC-traded shares typically will involve smaller (and riskier) companies, such as penny stocks that do not meet the listing requirements for established stock exchanges.

Different Types of Stock Exchanges

There are a variety of different ways to organize the trading that happens on a stock exchange, including:

Auction Markets

Much as its name implies, in an auction market, the price of securities is determined by the highest price buyers are willing to pay for them—that’s called a bid—and the lowest price the seller is willing to accept—that’s the offer. In an auction market, broker-dealers make bids and offers and then execute trades for their clients (or selves, if they’re acting as a dealer).

Dealer Markets

In a dealer market, dealers post the prices at which they are willing to buy or sell specific stocks. Dealers then facilitate all transactions by using their own money to buy and sell the securities, which provides liquidity to the stock market.

In other words, in a dealer market, a dealer might buy a stock from you at a certain price, even without having a particular buyer in mind to sell your stock to. Because you don’t have to wait for a buyer to get your money, you’re then free to buy other securities from the dealer or use that cash in any other way.

Electronic Exchanges

Instead of requiring brokers to sell on a trading floor, electronic exchanges use technology to connect buyers and sellers in a virtual marketplace. Today, nearly all stock exchanges support electronic trading, and very few still have in-person trading floors.

The automated electronic communication networks (ECNs) most electronic exchanges use enable the buy and sell orders for stocks and other securities to be made without market makers. In the United States, ECNs need to be registered with the Financial Industry Regulatory Authority (FINRA) as broker-dealers.

OTC Exchanges

Over-the-counter exchanges enable securities to be bought or sold outside of major stock exchanges, generally through broker-dealer networks. Typically, stocks that are traded OTC are smaller companies that don’t meet the listing requirements of the major stock exchanges, like penny stocks. Bonds may also be traded OTC.

What Are Stock Exchanges?

A stock exchange does not own shares. Instead, it acts as a market where stock buyers connect with stock sellers. Stocks can be traded on several exchanges such as the New York Stock Exchange (NYSE) or the Nasdaq.

Although most stocks are traded through a broker, it is important to understand the relationship between exchanges and the companies that trade. Also, there are various requirements for different exchanges designed to protect investors.

Key Takeaways

A stock exchange is a centralized location that brings corporations and governments so that investors can buy and sell equities.
Auction-based exchanges such as the New York Stock Exchange allow traders and brokers to physically and verbally communicate buy and sell orders.
Electronic exchanges take place on electronic platforms, so they don’t require a centralized physical location for trades.
Electronic communication networks connect buyers and sellers directly by bypassing market makers.
The OTCBB and Pink Sheets are two different over-the-counter markets where stocks delisted or unlisted stocks trade.

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Key Players at a Stock Exchange

Stock exchanges can be complex and require a number of different roles to facilitate the sales of securities. Here’s an overview of the biggest players:

Brokers: An individual or a firm that represents the interests of outside investors at a stock exchange. Because only members of a stock exchange are allowed to buy and sell assets on it, brokers act as agents who find buyers and sellers to fill orders for outsiders, like you. Brokers generally charge commissions or fees for their services, and some are employed by a stock exchange to help keep things moving.
Dealers: A firm or an individual that buys and sells securities for themselves. A dealer always aims to profit from the difference between the prices it can buy and sell securities at. In other words, it aims to buy a stock at a certain price not because it anticipates holding it for the long term but because it thinks it will be able to turn around and sell it for more than it paid. In this way, even though a broker does not represent exchange outsiders, it may end up helping indirectly facilitating trades with them in its pursuit of profit.
Broker-dealers: The roles of broker and dealer are frequently combined in one firm called a broker-dealer. They buy and sell stocks on behalf of outside investors, and they may also trade for their own benefit.
Market makers: This role is filled by dealers who buy and sell stocks for their own benefit specifically to increase the liquidity of a stock exchange as a whole. This added liquidity helps facilitate more efficient trading and ensure orderly markets. The NYSE has a class of market makers called specialists that only trade in one or a few individual stocks.

References

Buck, James E. The New York Stock Exchange: The First 200 Years. Greenwich Pub. Group, 1992. ISBN 0944641024.
Fraser, Steve. Every Man a Speculator: A History of Wall Street in American Life. Harper Perennial, 2006. ISBN 006662049X.
Geisst, Charles R. Wall Street: A History — From its Beginnings to the Fall of Enron. Oxford University Press, 2004. ISBN 0195170601.
Kent, Zachary. The Story of the New York Stock Exchange. Scholastic Library Pub., 1990. ISBN 0516047485.
Sloane, Leonard. The Anatomy of the Floor. Doubleday, 1980. ISBN 0385122497.
Sobel, Robert. N.Y.S.E.: A History of the New York Stock Exchange, 1935-1975. Weybright and Talley, 1975. ISBN 0679401245.

Future of the NYSE

New York Stock Exchange

The NYSE is a symbol of Wall Street, its first permanent home, and Wall Street itself represents American financial and economic power. Wall Street can sometimes represent elitism and cut-throat capitalism, but it also stirs feelings of pride about the market economy. Wall Street became the symbol of a country and economic system that many Americans see as having developed not through colonialism and plunder, but through trade, capitalism, and innovation. As the epitome of Wall Street, the NYSE has great significance, not just as a historical building and part of the development of the United States, but also as a measure of the power and influence of the United States in the world.

The future of the NYSE may be affected by three major factors: the continuing globalization of markets, the tumultuous economy, and the effect of technology on the market. The merger of the NYSE and Euronext, and the later merger with Deutsche Boerse, provides a trans-Atlantic connection of the stock and derivatives markets that should encourage more investors to purchase stocks in both the U.S. and Europe, more cheaply and efficiently. Since the NYSE has been losing listings, especially initial preferred offerings IPOs to European exchanges, the merging with European exchanges may regain the fees and trading profits. Also, in an increasingly challenging economy, when exchanges combine they can become more efficient by cutting staff and sharing technology. Such a global exchange will permit investors to operate from a common trading platform, which may help to stabilize international markets in times of economic crisis.

With the global economic problems that emerged in the latter part of 2008, the NYSE may find itself undergoing increasing regulation. Lack of effective regulation, particularly related to risky loans in the sub-prime mortgage market, has been blamed for the instability in the economy. Greater regulation will inevitably impact the successful operation of the NYSE.

Provided the technology in the NYSE remains state of the art, it will increasingly play a controlling role in the marketplace. This could act as a counterbalance to the conflicting emotions of human greed and fear, which have contributed to the roller-coaster ride the NYSE often takes when market forces go awry. Technology properly utilized in the future might offset emotion-driven swings in the markets and encourage confidence in difficult economic times. The NYSE’s pioneering efforts in the hybrid market may offer the best scenario in which computerized trading, which has the potential to inspire greater confidence, is still balanced by the human factor in the traditional face to face auction trading environment.

Major stock exchanges[]

Major stock exchanges (top 21 by market capitalization), as at 31 December 2012 (Monthly reports, World Federation of Exchanges)

Rank	Stock Exchange	Economy	Headquarters	Market Capitalization(USD billions)	Year-to-date Trade Value(USD billions)	Time Zone	Δ	DST	Open(local)	Close(local)	Lunch(local)	Open(UTC)	Close(UTC)
1	NYSE	23x15px United States	New York City	14,085	12,693	EST/EDT	−5	Mar–Nov	09:30	16:00	No	14:30	21:00
2	NASDAQ	23x15px United States	New York City	4,582	8,914	EST/EDT	−5	Mar–Nov	09:30	16:00	No	14:30	21:00
3	Tokyo Stock Exchange	23x15px Japan	Tokyo	3,478	2,866	JST	+9		09:00	15:00	11:30–12:30	00:00	06:00
4	London Stock Exchange	23x15px United Kingdom	London	3,396	1,890	GMT/BST	+0	Mar–Oct	08:00	16:30	No	08:00	16:30
5	Euronext	23x15px France23x15px Netherlands23x15px Belgium23x15px Portugal	Amsterdam	2,930	1,900	CET/CEST	+1	Mar–Oct	09:00	17:30	No	08:00	16:30
6	Hong Kong Stock Exchange	23x15px Hong Kong	Hong Kong	2,831	913	HKT	+8		09:15	16:00	12:00–13:00	01:15	08:00
7	Shanghai Stock Exchange	23x15px China	Shanghai	2,547	2,176	CST	+8		09:30	15:00	11:30–13:00	01:30	07:00
8	Toronto Stock Exchange	23x15px Canada	Toronto	2,058	1,121	EST/EDT	−5	Mar–Nov	09:30	16:00	No	14:30	21:00
9	Frankfurt Stock Exchange	23x15px Germany	Frankfurt	1,486	1,101	CET/CEST	+1	Mar–Oct	08:00 (Eurex)8:00 (floor)9:00 (Xetra)	22:00 (Eurex)20:00 (floor)17:30 (Xetra)	No	07:00	21:00
10	Australian Securities Exchange	23x15px Australia	Sydney	1,386	800	AEST/AEDT	+10	Oct–Apr	09:50	16:12	No	23:50	06:12
11	Bombay Stock Exchange	23x15px India	Mumbai	1,263	93	IST	+5.5		09:15	15:30	No	03:45	10:00
12	National Stock Exchange of India	23x15px India	Mumbai	1,234	442	IST	+5.5		09:15	15:30	No	03:45	10:00
13	SIX Swiss Exchange	20x16px Switzerland	Zurich	1,233	502	CET/CEST	+1	Mar–Oct	09:00	17:30	No	08:00	16:30
14	BM&F Bovespa	23x15px Brazil	São Paulo	1,227	751	BRT/BRST	−3	Oct–Feb	10:00	17:30	No	13:00	20:00
15	Korea Exchange	23x15px South Korea	Seoul	1,179	1,297	KST	+9		09:00	15:00	No	00:00	06:00
16	Shenzhen Stock Exchange	23x15px China	Shenzhen	1,150	2,007	CST	+8		09:30	15:00	11:30–13:00	01:30	07:00
17	BME Spanish Exchanges	23x15px Spain	Madrid	995	731	CET/CEST	+1	Mar–Oct	09:00	17:30	No	08:00	16:30
18	JSE Limited	23x15px South Africa	Johannesburg	903	287	CAT	+2		09:00	17:00	No	07:00	15:00
19	Moscow Exchange	23x15px Russia	Moscow	825	300	MSK	+4		10:00	18:45	No	06:00	14:45
20	Singapore Exchange	23x15px Singapore	Singapore	765	215	SST	+8		09:00	17:00	No	01:00	09:00
21	Taiwan Stock Exchange	23x15px Taiwan	Taipei	735	572	CST	+8		09:00	13:30	No	01:00	05:30

Top Stock Exchanges

Though there are more than 60 major stock exchanges in the world, the majority of action takes place on just a handful, including:

New York Stock Exchange: The NYSE is the world’s largest stock exchange. Some of the largest companies trade on the NYSE, including household names like Amazon (AMZN) or Apple (AAPL). The NYSE is an auction-based market, and while the majority of trading takes place electronically, it still maintains a physical trading floor—although in-person trading has been suspended for the Covid-19 pandemic.
Nasdaq: The Nasdaq is the second-largest stock exchange in the world and employs a dealer market system. The Nasdaq pioneered electronic trading when it opened for business in the 1970s, and today it remains the listing of choice for major technology companies that often choose it for because of its lower barrier to public listing.
London Stock Exchange: The London Stock Exchange (LSE) is the largest stock exchange in Europe. Thousands of companies from all over the world trade on the LSE, and it maintains a physical trading floor in London.
Shanghai Stock Exchange: The Shanghai Stock Exchange is the largest exchange in China. The exchange trades two types of company stocks: A-shares and B-shares. B-shares are available for foreign investment and are quoted in U.S. dollars while A-shares are quoted in yuan. Foreign investors can only invest in A-shares if they meet certain qualifications.

History

The origin of the New York Stock Exchange can be traced to May 17, 1792, when the Buttonwood Agreement was signed by 24 stock brokers on Wall Street in New York City under a buttonwood tree. On March 8, 1817, the organization drafted a constitution and renamed itself the «New York Stock & Exchange Board.» (This name was shortened to its current form in 1863.) Anthony Stockholm was elected the Exchange’s first president.

The floor of the New York Stock Exchange in 1908

The first central location of the Exchange was a room rented for $200 a month located at 40 Wall Street. The building was destroyed in the Great Fire of New York (1835), after which the Exchange moved to a temporary headquarters. In 1863, it changed its name to the New York Stock Exchange (NYSE). In 1865, it moved to 10-12 Broad Street.

The Dow Jones Industrial Average (DJIA) was created in 1896 by Charles Dow, co-founder of Dow Jones & Company, a financial news publisher. This figure was calculated by tracking the stock prices of twelve different companies and taking their average. Published in The Wall Street Journal, the DJIA quickly became a popular indicator of stock market activity. The volume of stocks traded increased sixfold in the years between 1896 and 1901, and the NYSE needed a larger space to conduct business. Eight New York City architects were invited to participate in a design competition for a new building and the Exchange selected the neoclassic design from architect George B. Post. Demolition of the existing building at 10 Broad Street and the adjacent lots started on May 10, 1901.

Did you know?
The New York Stock Exchange building on Broad Street opened on April 22, 1903 and was designated a National Historic Landmark on June 2, 1978

The New York Stock Exchange building opened on April 22, 1903, at a cost of $4 million. The trading floor was one of the largest volumes of space in the city at the time, measuring 109 feet (33 m) by 140 feet (43 m), with a skylight set into a 72-foot-high ceiling. The main façade of the building features marble sculpture by John Quincy Adams Ward in the pediment, above six tall Corinthian capitals called “Integrity Protecting the Works of Man.”

In 1922, a building designed by the architectural practice of Trowbridge & Livingston was added at 11 Broad Street for offices, and a new trading floor called «the garage.» Additional trading-floor space was added in 1969 and 1988 (the «blue room»), with the latest technology for information display and communication. Another trading floor was opened at 30 Broad Street in 2000.

With the arrival of the hybrid market, whereby a stock broker may either have his order executed immediately in a fully automated electronic exchange, or have it routed to the trading floor where it is completed manually via the more traditional live auction method in the presence of a specialist broker, a greater proportion of trading was executed electronically and the NYSE decided to close the 30 Broad Street trading room in early 2006. In late 2007, the exchange closed the rooms created by the 1969 and 1988 expansions due to the declining number of traders and employees on the floor, a result of increased electronic trading.

On June 2, 1978, the NYSE building was designated a National Historic Landmark on the National Register of Historic Places.

The Bottom Line

Every stock must list on an exchange where buyers and sellers meet. The two big U.S. exchanges are the NYSE and the Nasdaq. Companies listed on either of these exchanges must meet various minimum requirements and baseline rules concerning the «independence» of their boards.

But these are by no means the only legitimate exchanges. Electronic communication networks are relatively new, but they are sure to grab a bigger slice of the transaction pie in the future. Finally, the OTC market is a fine place for experienced investors with an itch to speculate and the know-how to conduct a little extra due diligence.

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