How Is a Stock Trade Executed on the NYSE?

Order Entry

When an investor wants to buy or sell a stock on the New York Stock Exchange (NYSE), he will most often log in to his brokerage firm's website and trading platform. He may also call the order into his broker. The investor will obtain a current quote on the stock and decide whether to enter a market order (accepting the prevailing market price for the stock and receiving priority execution) or a limit order (specifying the purchase or sale price for the order). He will designate whether it is a buy or sell order, the stock symbol, the number of shares and at what price he wants the trade executed if using a limit order. He then submits the order to his brokerage firm.

Handling and Execution

The brokerage firm's computer system receives the order from the customer and logs the order. If the brokerage firm is a NYSE member firm, the order is instantly transmitted to the NYSE SuperDot system. SuperDot is the NYSE electronic order routing system. The NYSE estimates that over 99 percent of today's trades go through the SuperDot system. From SuperDot, the trade is most often routed to either the Broker Booth Support System (BBSS) or straight to the wireless e-Broker Hand-Held Terminal in a floor trader's hands (see Resources below). The computer system checks the order against the prevailing market in that stock, executes the trade instantly if it is a market order, or stores the order for later execution if it is a limit order and the limit price is higher or lower than the current market price. The executed order is then routed back through the system from the SuperDot to the Common Access Point (CAP) Network and back to the NYSE member firm.

Reporting

Once the brokerage firm receives confirmation of the trade execution, it again logs the trade and routes the data through the Internet to its website and trading platform. As the investor watches her screen, she will receive an alert that the trade has been executed. For market orders, the entire process usually takes less than 15 seconds. Limit orders may take all day (and may not be executed at all), depending on the limit price. The brokerage firm will then send a formal trade confirmation by email or snail mail, depending on the customer's preference.

Resources

• NYSE Broker Booth Support System Overview