The New York Stock Exchange traces its origin back 200 years. Centuries of growth and innovation the NYSE remains the worlds foremost securities marketplace. Over the years its commitment to investors has been unwavering and its persistent application of the latest technology has allowed it to maintain a level of market quality and service that is unparalleled. The NYSE has grown to become the global marketplace of today. Each day on the NYSE trading floor and auction takes place. Open bid and offers are managed on the trading floor page of NYSE. com by exchange members acting on behalf of institutions and individual investors.
Buy and sell orders for each listed security meet directly on the trading floor in assigned locations. The NYSE trading floor contains 20 posts with more that 400 trading positions. Prices are determined through supply and demand. Stock buy and sell orders funnel through a single location ensuring that the investor no matter how big or small is exposed to a wide range of buyers and sellers. The NYSE is an agency auction market. This means The essential point is that trading at the NYSE takes place by open bids and offers by Exchange members, acting as agents for institutions or individual investors.
A member firm is a company or individual who owns a “seat” on the trading floor. Only member firms are allowed to buy and sell securities on the trading floor. To become a member firm, a company must meet rigorous professional standards set by the Exchange. The number of seats has remained constant, at 1,366, since 1953. Institutional investors are corporations that invest on behalf of individuals and companies. Institutions include pension funds, mutual funds, insurance companies and banks Buy and sell orders meet directly on the trading floor, and prices are determined by the interplay of supply and demand.
In contrast, in the over-the-counter market and the price is determined by a dealer who buys and sells out of inventory. At the NYSE, each listed stock is assigned to a single post where the specialist manages the auction process. NYSE members bring all orders for NYSE-listed stocks to the Exchange floor either electronically or by a floor broker. A broker acts as an agent, representing customer orders to buy or sell stock. There are two main types of floor brokers: commission brokers and independent brokers. Commission Brokers. Commission brokers are employed by brokerage houses, which are members of the NYSE.
A commission broker executes the orders of his firm’s customers. Independent Brokers. Independent brokers work for themselves. Although they are not affiliated with any brokerage house, they handle orders for brokerage houses that do not have full-time brokers, whose brokers are off the floor, or are too busy to handle a specific order. Independent brokers were once referred to as “$2 brokers,” a term coined when they received $2 for every 100 shares they traded. Their fee, paid by commissioned brokers, is called a “floor brokerage. ” This fee is fully negotiable depending on the size and difficulty of the order they are trading.
As a result, the flows of buy and sell orders for each stock is funneled to a single location. This heavy stream of diverse orders is one of the great strengths of the Exchange. It provides liquidity – the ease with which securities can be bought and sold without wide price fluctuations. When an investor’s transaction is completed, the best price will have been exposed to a wide range of would-be buyers and sellers. Each day on the NYSE, an average of over 1 billion shares of stock, worth more than $44 billion, changes hands without a glitch.
However, disputes and controversies occasionally arise. For more than 125 years, NYSE arbitration has been used to resolve disputes between investors and brokers. Arbitration is often viewed as a practical alternative to lengthy and expensive litigation. The New York Stock Exchange also offers mediation as a way to resolve disputes. Mediation is a voluntary process where the mediator meets with the parties to help them reach a settlement. The mediator does not have the power to decide the case. Mediation is not adversarial; there is no record of the mediation.