New York Stock Exchange

The New York Stock Exchange (NYSE) is the oldest stock exchange in the United States. Established in 1792 along a wall that had been used to keep wild pigs out of settlers’ gardens in lower Manhattan (WALL STREET), the NYSE is the largest stock exchange in the world based on dollar value of shares traded. In 2000 the exchange traded 262.5 billion shares, valued at $11.1 trillion dollars. In 1971 the NYSE became a nonprofit CORPORATION directed by a 25-member BOARD OF DIRECTORS. The board of directors includes the CHIEF EXECUTIVE OFFICER, 12 public members, and 12 members from the securities industry. The mission of the NYSE (also known as the “Big Board,” “Wall Street,” and “the Exchange”) is “to add value to the CAPITAL-raising and ASSET-management process by providing the highest-quality and most cost-effective and selfregulating marketplace for the trading of FINANCIAL INSTRUMENTS . . .” As the country’s premier stock exchange, the NYSE’s listing requirements are more stringent than most exchanges, precluding many small and unproven corporations. To be a listed company on the NYSE (there were 2,862 companies in 2000), a domestic company must, among other requirements
• have a minimum of 2,000 round-lot (100 shares) SHAREHOLDERS
• have an average trading volume of at least 100,000 shares in the previous six months
• have at least 1.1 million public shares
• have a MARKET VALUE for public companies of at least $100 million
• have minimum pretax earnings of $6.5 million in the last three years
There are other requirements and slightly different rules for non-U.S. companies. Many corporations consider it a status symbol to become large enough to be traded on the Big Board. Most of the DOT-COMS created in the 1990s never met the NYSE standards. Some major technology companies, like Microsoft, have chosen to remain on the National Association of Securities Dealers Automated Quotations (NASDAQ) system rather than be listed with the NYSE. While the NYSE is the largest stock exchange in dollar volume, the NASDAQ is the largest exchange based on number of shares traded. At the end of 2000, the stocks on the NYSE had a global market capitalization (number of shares multiplied by price per share) of $17.1 trillion. By comparison, the NASDAQ had a market capitalization of $3.6 trillion, the Tokyo exchange had $3.2 trillion, and the London exchange had $2.6 trillion in market capitalization. In addition to trading shares of U.S. corporations, foreign companies, and AMERICAN DEPOSITORY RECEIPTS (ADRs, receipts representing shares of foreign corporations) are also traded on the exchange. There are over 1,300 members (called “seats”) of the New York Stock Exchange, which are owned by securitiesindustry executives. NYSE members execute trades for their clients, though a few members trade only for their own accounts. Trading posts on the floor of the exchange are manned by specialists. When stockholders order or sell shares of NYSE-listed stocks, the brokerage firm forwards the order to the floor specialist, who sets the market price based on the number of buy and sell orders for that stock that day. Specialists are charged to provide an orderly market, facilitating the exchange of shares. They maintain a portfolio of their own in order to execute trades when there is no liquidity in the market. Floor specialists have significant market power, earning comfortable livings providing market transactions. In 2000, the NYSE changed market pricing from measurement in eighths to a decimal system. Members also debated converting into a for-profit publicly held corporation but did not follow through on that initiative. Becoming a for-profit corporation would have changed the exchange’s relationship with the SECURITIES AND EXCHANGE COMMISSION, which oversees the securities industry. In response to competition from NASDAQ, the NYSE instituted off-hours off-hour trading.
See also EQUITY; STOCK MARKET, BOND MARKET.