New York Stock Exchange

The New York Stock Exchange (NYSE), nicknamed the "Big Board," is a New York City-based privately-owned stock exchange by the NYSE Group (NYX). It is the largest stock exchange in the world by dollar volume and the second largest by number of companies listed. Its share volume was exceeded by that of NASDAQ during the 1990s, but the total market capitalization of companies listed on the NYSE is five times that of companies listed on NASDAQ. The New York Stock Exchange has a global capitalization of $23.0 trillion as of September 30, 2006.

The NYSE is operated by NYSE Group, which was formed by merger with the fully electronic stock exchange Archipelago Holdings. The New York Stock Exchange trading floor is located at 11 Wall Street, and is composed of five rooms used for the facilitation of trading. The main building is listed on the National Register of Historic Places and is located at 18 Broad Street, between the corners of Wall Street and Exchange Place.

NYSE Group is acquiring Euronext, and many of its operations (particularly IT and the trading platform) will be combined with that of the New York Stock Exchange and NYSE Arca.

Business

Trades on the floor of the New York Stock Exchange always involve a face-to-face interaction. There is one podium or desk on the trading floor for each of the exchange's three thousand or so stocks.

Trades on the floor of the New York Stock Exchange always involve a face-to-face interaction. There is one podium or desk on the trading floor for each of the exchange's three thousand or so stocks.

The NYSE trades in a continuous auction format. There is one specific location on the trading floor where each listed stock trades. Exchange members interested in buying and selling a particular stock on behalf of investors gather around the appropriate post where a specialist broker, who is employed by a NYSE member firm (that is, he/she is not an employee of the New York Stock Exchange), acts as an auctioneer in an open outcry auction market environment to bring buyers and sellers together and to manage the actual auction. They do on occasion (approximately 10% of the time) facilitate the trades by committing their own capital and as a matter of course disseminate information to the crowd that helps to bring buyers and sellers together. Most of the time natural buyers and sellers meet in a market that provides efficient price discovery in an auction environment that is designed to produce the fairest price for both parties. The human interaction and expert judgment as to order execution differentiates the NYSE from fully electronic markets. However, in excess of 50% of all order flow is now delivered to the floor electronically. Recent proposals have been made to adopt a Hybrid market structure combining elements of open outcry and electronic markets. The frenzied commotion of men and women in colored smocks has been captured in several movies, including Wall Street.

In the mid-1960s, the NYSE Composite Index (NYSE: NYA) was created, with a base value of 50 points equal to the 1965 yearly close, to reflect the value of all stocks trading at the exchange instead of just the 30 stocks included in the Dow Jones Industrial Average. To raise the profile of the composite index, in 2003 the NYSE set its new base value of 5,000 points equal to the 2002 yearly close. (Previously, the index had stood just below 500 points, with lifetime highs and lows of 670 points and 33 points, respectively.) The lifetime high of the NYSE Composite in trading stands at 9,188.17 points, reached on December 28, 2006, while its lifetime low (as currently calculated) stands at 347.77 points, reached in October 1974.

Since September 30, 1985 the NYSE trading hours have been 9:30 - 16:00 EST. The right to directly trade shares on the exchange is conferred upon owners of the 1366 "seats". The term comes from the fact that up until the 1870s NYSE members sat in chairs to trade; this system was eliminated long ago. In 1868, the number of seats was fixed at 533, and this number was increased several times over the years. In 1953, the exchange stopped at 1366 seats. These seats are a sought-after commodity as they confer the ability to directly trade stock on the NYSE. Seat prices have varied widely over the years, generally falling during recessions and rising during economic expansions. The most expensive seat was sold in 1929 for $625,000, which, adjusted for inflation, is over six million in today's dollars. In recent times, seats have sold for as high as $4 million in the late 1990s and $1 million in 2001. In 2005, seat prices shot up to $3.25 million as the exchange was set to merge with Archipelago and become a for-profit, publicly traded company. Seat owners received $500,000 cash per seat and 77,000 shares of the newly formed corporation. The NYSE now sells one-year licenses to trade directly on the exchange.

History

See also: Economy of New York City

The origin of the NYSE can be traced to May 17, 1792, when the Buttonwood Agreement was signed by twenty-four stock brokers outside of 68 Wall Street in New York 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 first central location of the NYSE was a room rented for $200 a month in 1817 located at 40 Wall Street. But the volume of stocks traded had increased sixfold in the years between 1896 and 1901 and a larger space was required to conduct business in the expanding marketplace. 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 10 May 1901.

The New York Stock Exchange building opened at 18 Broad Street 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 at 109 x 140 feet wide with a skylight set into a 72 foot high ceiling The main facade 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”. The building was listed as a National Historic Landmark and added to the National Register of Historic Places on June 2, 1978.

In 1922, a building designed by 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, a greater proportion of trading was executed electronically and the NYSE decided to close the 30 Broad Street trading room in early 2006.

Events

U.S. Secretary of Commerce Donald L. Evans rings the opening bell at the NYSE on April 23, 2003. Former chairman Richard Grasso is also in this picture.

U.S. Secretary of Commerce Donald L. Evans rings the opening bell at the NYSE on April 23, 2003. Former chairman Richard Grasso is also in this picture.

The Exchange was closed shortly after the beginning of World War I (July 1914), but it was re-opened on November 28 of that year in order to help the war effort by trading bonds.

On September 16, 1920, a bomb exploded on Wall Street outside the NYSE building, killing 33 people and injuring more than 400. The perpetrators were never found. The NYSE building and some buildings nearby, such as the JP Morgan building, still have marks on their facades caused by the bombing.

The Black Thursday crash of the Exchange on October 24, 1929, and the sell-off panic which started on Black Tuesday, October 29, are often blamed for precipitating the Great Depression. In an effort to try to restore investor confidence, the Exchange unveiled a fifteen-point program aimed to upgrade protection for the investing public on October 31, 1938.

On October 1, 1934, the exchange was registered as a national securities exchange with the U.S. Securities and Exchange Commission, with a president and a thirty-three member board. On February 18, 1971 the not-for-profit corporation was formed, and the number of board members was reduced to twenty-five.

On August 24, 1967, Abbie Hoffman led a group opposed to capitalism (and other things, including the Vietnam War) in the gallery of the New York Stock Exchange. The protestors threw fistfuls of (mostly fake) dollar bills down to the traders below, who began to scramble frantically to grab the money, as fast as they could. Hoffman claimed to be pointing out that, metaphorically, that's what NYSE traders "were already doing". The NYSE then installed barriers in the gallery, to prevent this kind of protest from interfering with trading again.

Following a 554.26 point drop in the Dow Jones Industrial Average (DJIA) on October 27, 1997, officials at the Exchange for the first time invoked the "circuit breaker" rule to stop trading. This was a very controversial move and prompted a quick change in the rule; trading now halts for an hour, two hours, or the rest of the day when the DJIA drops 10, 20, or 30 percent, respectively. In the afternoon, the 10 and 20% drops will halt trading for a shorter period of time, but a 30% drop will always close the exchange for the day. The rationale behind the trading halt was to give investors a chance to cool off and reevaluate their positions.

Further information: October 27, 1997 mini-crash

The NYSE was closed from September 11 until September 17, 2001 as a result of the September 11, 2001 attacks.

On September 17, 2003, NYSE chairman and chief executive Richard Grasso stepped down as a result of controversy concerning the size of his deferred compensation package. He was replaced as CEO by John Thain, the former President of Goldman Sachs Group Inc.

On April 21, 2005, the NYSE announced its plans to acquire Archipelago, in a deal that is intended to bring the NYSE public.

On December 6, 2005, the NYSE's governing board voted to acquire rival Archipelago and become a for-profit, public company. It began trading under the name NYSE Group on March 8, 2006.

The Dow Jones Industrial Average which started on October 1 1928 hit a record high on January 03 2006 of 12.580,35. Marsh Carter is the Chairman of the New York Stock Exchange, succeeding John S. Reed. John Thain is the CEO of the NYSE. Gerald Putnam and Catherine Kinney are the co-Presidents of the NYSE.

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* 1792 - The first traded company on the NYSE

* 1817 - Rules and a Constitution - The New York Stock and Exchange Board

* 1867 - The First Stock Ticker

* 1873 - NYSE closes for 10 Days

* 1896 - DJIA published by The Wall Street Journal

* 1903 - NYSE moves into its new quarters at 18 Broad Street

* 1907 - Panic of 1907

* 1914 - World War I causes longest exchange shutdown

* 1915 - Market price in Dollars

* 1929 - Central Quote System

* 1929 - Black Thursday (October 24) and Black Tuesday (October 29)

* 1943 - Women Work on Trading Floor

* 1949 - Longest Bull Run begins

* 1954 - Dow surpasses 1929 peak

* 1966 - NYSE creates Common Stock Index

* 1966 - Floor data fully automated

* 1970 - Securities Investor Protection Corporation established

* 1971 - NYSE Not-for-Profit

* 1972 - DJIA Closes Over 1,000

* 1977 - Foreign Brokers/Dealers are admitted

* 1979 - New York Futures Exchange established

* 1985 - Ronald Reagan visits NYSE

* 1987 - Largest One-Day Percentage Drop of DJIA (Black Monday, 19 October)

* 1991 - Dow exceeds 3,000

* 1992 - NYSE celebrates its Bicentennial

* 1996 - Real-time Ticker introduced

* 1999 - DJIA tops 10,000

* 2000 - DJIA at record high (until 2006)

* 2000 - First Global Index Launches

* 2001 - Trading in Fractions (n/16) ends, replaced by decimals (decimalisation)

* 2001 - Terrorist Attacks on World Trade Center (September 11): NYSE closed for 4 session days

* 2003 - NYSE Composite Index relaunched

* 2005 - NYSE and ArcaEx agree to merge

* 2006 - NYSE and ArcaEx merge - NYSE Group, Inc. For-profit, publicly owned company

* 2006 - NYSE Group buys Euronext, creating the first trans-Atlantic stock exchange group

* 2006 - DJIA tops 12,000 on October 19th; NYSE Composite tops 9,000 on December 4th

* 2007 - George W. Bush visits the NYSE. He showed up unannounced to the Floor about an hour and a half before an FOMC interest rate decision. The market nearly came to a complete stand-still for approximately 30 minutes. During the trading day he spent a few minutes talking with specialists

New York Stock Exchange Online