The Birth of the New York Stock Exchange
The New York Stock Exchange is one of the best known industry brands in the world. This giant in the industry had its humble beginnings under a buttonwood tree. On May 17. 1792, 24 brokers signed an agreement to sell shares of companies while charging a commission fee to do so for others who wanted to invest in a company. The signers of the Buttonwood Agreement drafted their first constitution on March 8th, 1817, and named their nascent organization the New York Stock & Exchange Board.
In 1863, the name was shortened to the name we use today- the New York Stock Exchange or NYSE. Back then, you could only join the NYSE by purchasing a seat which were limited in number to 1,366. A seat in the NYSE became a hot commodity. However, in 2006, this membership-only organization went public and electronic. It is now called the NYSE Group, Inc. Interestingly, the seats of the NYSE translated into shares of stock which are now traded under the ticker symbol NYSE: NYX. In 2007, it merged with Euronext, making trading European stocks much easier.
The NYSE still uses the “open cry” method of stock trading where stocks are sold like a public auction with verbal bids at the trading post. These trading posts are centered on the specialist’s location for particular stocks. However, only a select group of stocks are handled this way. Most of the trades are executed electronically. The NYSE is the last big stock exchange to have the best of both worlds.
Key Players of the NYSE
- Specialists: Specialists are brokers dealing in a particular stock who remain at one location on the trading floor.They help level out the supply and demand of stocks available in the market. According to the U.S. Securities and Exchange Commission, “They do this by stepping in with their own capital to help reduce market volatility when there are not sufficient buyers or sellers.” Most specialists are in charge of trading 5-10 stocks. They track their trades and quotation changes in an “order book.”
- Floor Traders: They trade exclusively from their own accounts but can also act on behalf of others and receive commission for their services. Like their name indicates, these are the people seen on the floor of the stock exchange.