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The New York Stock Exchange is the world's largest equity market. For example, an average of 1.46 billion shares worth approx $46.1 billion are traded on the NYSE every day. New York Stock Exchange listed companies are among the world’s biggest and best. They range from 'blue-chip' companies that have been trading for decades, to young, high-growth corporations. There are approximately 2,800 companies listed as of October 2007. |
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The NYSE has a status called 'members'. A member firm is a company or individual who owns or leases a "seat". Only these member firms are allowed to buy and sell securities on the trading floor. The member firms must meet rigorous professional standards set by the Exchange. The number of seats has remained constant, at 1,366, since 1953. Since 1868 it has been possible for members to sell or lease their seats after a change in the rules of the exchange.
The NYSE can trace it's history all the way back to 1792 when the Buttonwood Agreement was signed to commit to the highest standards to investors and companies.
The New York Stock Exchange has to maintain very high standards of ethics and conduct at very competitive prices. In the modern world, there are so many global companies with a 'foot' in many financial centers that it would be relatively easy for them to uproot and move to a new more competitive location.
New York Stock Exchange History
The New York Stock Exchange history is a colorful one starting with it's formation under the Buttonwood Tree in 1792 to the Dow breaking 10,000 in 1999. Here are some facts about members and member firms throughout NYSE history:
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Highest price paid for a membership: $4,000,000 on December 01, 2005
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Lowest price paid for a membership: $2,750 in 1871
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First member firm to incorporate: Woodcock, Hess & Co., Inc., 1953
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First member firm to go public: Donaldson, Lufkin & Jenrette, 1970
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First member firm to be listed on the NYSE: Merrill Lynch, 1971
As the 20th century dawned, the NYSE was firmly established as one of America’s preeminent financial institutions. Trading in listed stocks had tripled between 1896 and 1899 and would nearly double again by 1901.
More space was clearly needed, the market was expanding. So the Exchange invited eight of New York City’s leading architects to join in a competition to design a grand new building.
The Exchange chose the neoclassic design of architect George B. Post. Today, the Exchange building is considered one of Post’s masterpieces and is a New York City and American national landmark.
Of course, one of the most important events in the New York Stock Exchange history happened in 1929 when the 'Great Depression' and stock market crash occurred. It is a subject about which I have done quite a lot of reading and find fascinating. If you plan to understand crowd behavior or human psychology, it is simply immiscible!
Stock prices fell sharply on October 24 1929, Black Thursday, with record volume of nearly 13 million shares. Five days later, the market crashes on volume of over 16 million shares this is a level not to be surpassed for 39 years. On September 3 1929, the Dow Jones Industrial Average reaches its 1929 peak of 381.17.
On October 29, Black Tuesday, prices fall sharply and the stock market crashes. This crash produces a record volume of nearly 16 million shares. The Dow Jones Industrial Average falls more than 11 percent.
On March 2009, The Dow Jones Industrial Average falls to 6000 mark and rebounded since.
The New York Stock Exchange Dow Jones Index
The Dow Jones is the main US index. In fact, it is actually the Dow Jones Industrial Index. It takes the share prices and measures the movements of 30 'typical' industrial companies.
The DJIA is the most widely followed index on the New York Stock Exchange, and probably in the USA. However, if you want a more realistic view of the US market, the Standard and Poor's index series is likely to be a more comprehensive guide for most investors.
The Dow Jones Index is calculated by adding the New York closing prices and adjusting them by a 'current average divisor'.
This is an adjustable figure which is designed to preserve the continuity of the index over time. This is done to take account of occasional changes to the companies that comprise the index.
The cornerstone of the company is its main publication, The Wall Street Journal. The Journal, which was founded in 1889, has a current circulation of around 2 million.
New York Stock Exchange Seat System
A seat on the New York Stock Exchange represent both an equity interest in the Exchange as well as the right to access the trading facilities of the market.
A Membership on the NYSE is traditionally referred to as a 'seat' because in the early year of its existence, Members sat in assigned chairs in the hall where the Exchange’s daily roll call of stocks was conducted.
After a post-Civil War boom in stock trading, the Exchange adopted a system of continuous trading, replacing calls of stocks at set times with simultaneous trading of all listed stocks on a large open trading floor.
The term 'seat' lost its literal meaning with the advent of continuous trading in 1871. Trading was then conducted at trading posts on a large open floor. The seats that the brokers had occupied were gone. Owning or leasing a seat on the Exchange enabled qualified and licensed professionals to buy and sell securities on the floor.
In 1868 the Exchange established a fixed number of Memberships and revised its rules to allow Members to sell their seats. After selling for as little as $4,000 in the late 1860s and early 1870s, Memberships reached $80,000 by the turn of the century, reaching a high of $625,000 during the bull market of 1929 before reaching new highs of over $1 million during the 1980s stock market boom.
In 1990, a seat sold for $250,000. The highest price ever paid for a seat was $4 million on Dec. 1, 2005, followed by several seat sales at the same price.
Since the late 1970s, NYSE Members have been permitted to lease seats and their assigned trading rights to qualified individuals.
At the close of the market on December 30, 2005, member seat sales on the New York Stock Exchange officially ended, in anticipation of the NYSE’s plans to become a publicly traded company by way of merger with Archipelago Holdings Inc.
In 2005, NYSE seat prices have reached an historic high, quadrupling from a low of $975,000 on Jan. 11 to reach a new all-time high of $4 million in early December. The most recent seat sale, on Dec. 29, was for $3,505,000.
On Wednesday, Jan. 4, 2006, the NYSE conducted a Dutch auction for trading licenses. This gave Members and Member organizations the right to access the trading facilities of the NYSE market.
New York Stock Exchange Listing Rules
The full rules are codified in Section 303A of the NYSE's Listed Company Manual. These were approved by the SEC in 2003. Applicant companies also now have to comply with the Sarbanes-Oxley Act of 2002.
New York Stock Exchange Trading Floor
The New York Stock Exchange trading floor works in a different way to most other exchanges.
Stock trading is done via a floor based system that uses specialists. The New York Stock Exchange trading floor has seventeen trading posts and each stock is assigned to one of these posts. This means that trading in any one stock is centralized.
The specialists are assigned specific trading posts and therefore specific stocks. They act in a way that is deemed to maintain an 'orderly' market.
Member firms brokers and local brokers all use these specialists for trades. A specialist will sit just outside their trading post as floor brokers move from post to post.
There is some international trading on the New York Stock Exchange trading floor. Mostly, this is carried out in stocks that are not US companies but maintain a listing to have access to US capital. These firms are mainly confined to ADRs or American Depository Receipts.
The primary order processing system to support equity trading is called SuperDot. This stands for: Super Designated Order Turnaround System. The system allows the NYSE to see the current status of any equity order. A member firm can input orders and these go straight to the trading post where the stock is traded.
After the order has been traded and completed, an execution report is returned to the member firm. The SuperDot system is believed to be able to process 7 billion shares per trading day.