About the New York Stock Exchange

Now well into its third century, the New York Stock Exchange is the world's largest securities market. It is much more than the trading floor located at 18 Broad Street in New York City. In the twenty-first century, the NYSE is the center of a global network of stock exchanges and other securities markets. If you are serious about investing, you'll find it useful to know about the NYSE, its scope and how it functions.

Identification

The New York Stock Exchange is a marketplace for shares of stock in the companies it lists, which are bought and sold each day on its trading floor. Like other stock exchanges, it brings businesses seeking capital together with people who have money to invest. It serves a vital function in this regard by promoting liquidity (marketability) for stocks, enabling businesses to raise the money to expand and sustain economic growth.

History

The origin of the NYSE dates to the "Buttonwood Agreement" of 1792, when stockbrokers agreed to meet regularly in New York City. By 1817, they created a formal organization to manage trading: the New York Stock & Exchange Board. Soon thereafter, technology became a key factor. Railroads became the dominant stocks, anticipating the explosion of technology-driven companies in the late 1800s. The Exchange began to use the telegraph in 1844 and the stock ticker in 1867 to speed up communication and order processing. In 1869, listed companies were prohibited from issuing shares in secret. This and other reforms fostered what we now call "transparency" and built confidence in the integrity of the trading process. During the 20th century, NYSE trading grew from a few tens of thousands of shares daily to millions, then hundreds of millions of shares. October 10, 1953 was a red-letter day; it was the last time less than one million shares were traded. In the 21st century, the NYSE is expanding to create an intercontinental stock market that reflects the increasing globalization of commerce.

Size

The New York Stock Exchange is the world's largest, with over 200 million shares traded daily on average as of 2006. It lists about 2,400 stocks, plus another 1,200 European stocks as a result of its merger with Euronext that was completed in 2006. The merger made the NYSE (now NYSE/Euronext) the first interconnected network of securities exchanges. It includes the Paris Bourse, London Stock Exchange, options trading on the American Stock Exchange and a variety of other securities exchanges in several countries.

Types

There are many types of stocks traded on the NYSE. The majority are common stocks, which are shares that give an investor partial ownership of a company, voting privileges and the opportunity to see their equity grow if the company does well. Preferred stocks also confer ownership, usually without voting rights, but offer high dividends instead of equity growth and are designed for investors seeking income rather than growth. Some stocks traded on the NYSE are also categorized as "blue chips," which are the most prestigious and well-established companies. Cyclical stocks are those tend to rise or fall in value with the health of the economy, such as airlines and automakers. Defensive stocks are the reverse---they are likely to retain value even in poor economic climates and are typically companies that supply staple goods people must buy regardless of economic conditions.

Features

The NYSE provides a wide array of features, including research tools for investors. When investors have decided to buy or sell stocks, they have several options, including trading "at market" (the current price), issuing a limited order that specifies a price and stop orders to buy or sell at a particular price to protect other transactions from excessive losses. As the network of securities exchanges has expanded in recent years, investors can also trade foreign stocks, bonds, commodities and options within the NYSE/Euronext system. As of 2008, a "Hybrid Market" was under development and partially implemented. In its envisioned form, this will provide investors immediate access to any of the stocks traded on a NYSE/Euronext exchange anywhere in the world.

Resources

• NYSE/Euronext