How to Become a Trader on the NYSE
The trading floor of the New York Stock Exchange (NYSE) is an icon of American capitalism. In the seemingly chaotic open outcry system, floor traders buy and sell shares of stock through specialists, who act as the auctioneers in a specific name and provide information about bids and offers. In 2007, the NYSE began trading stock under a hybrid system where specialists and floor traders were augmented by computers that made markets and executed trades independently. As a result, many began to anticipate a day when the floor of the exchange would be obsolete, though the bear market of 2008 was evidence to some of the advantages of human traders as a sort of informal circuit breaker.
Other People Are Reading
Instructions
-
-
1
Buy a seat. Until recently, the right to trade directly on the floor of the NYSE was reserved to the owners of 1366 "seats," any one of which used to sell for upwards of $1 million. When, in 2005, the exchange announced its merger with Archipelago and its transformation into a publicly traded company, the price for seats shot up to $3.25 million. Naturally, the price for a seat fluctuates according to supply and demand.
-
2
Become a member. Since the merger, the NYSE has conferred the right to trade directly on the floor to registered members of the exchange. Individual investors, however, cannot be members, only qualifying firms. These firms must fill out a detailed membership application describing themselves and the kinds of activities they seek to undertake on the exchange. Admitted members can then apply for a trading license that must be renewed annually at a fixed price. The fee for a floor trading license was $40,000 in 2009.
-
-
3
Get hired. Clearly, given the large barriers to entry on the floor, most floor traders are hired by the owners of seats or other licensed members. These traders will be highly trained and educated, having demonstrated their knowledge and skill with prior trading or market making experience, and having passed several of the NASD series exams for securities, trading, options and/or futures.
-
1
Tips & Warnings
The Series 7 exam is required for professional traders to register with the Financial Industry Regulatory Authority (FINRA). Series 63 is necessary to solicit orders for any type of security. These and other certifications that might be required by firms hiring floor traders are administered directly by FINRA.
