By Aniket Bose. Edited by Arjun Chandrasekar.
The New York Stock Exchange is an American stock exchange in the Financial District of Lower Manhattan in New York City. It is by far the world’s largest stock exchange by market capitalization of its listed companies at 30.1 trillion U.S dollars as of February 2018.
Since they aren’t any different types of the New York Stock Exchange, instead we will focus on these things: Purpose of the New York Stock Exchange, How does the New York Stock Exchange work, and What are the things traded on the New York Stock Exchange. Let’s dive deep into finding more information on the New York Stock Exchange.
What is the Purpose of the New York Stock Exchange?
The New York Stock Exchange has two primary functions. It provides a central marketplace for investors to buy and sell stocks of various companies. It also enables companies to list their shares and raise their capital from interested investors. It provides a location where its members can trade stocks in the listed companies of NYSE (New York Stock Exchange). Most investors aren’t members of the NYSE, but many of the brokerage companies that allow them to invest in stocks are. The NYSE also acts as a gateway for companies that want to raise money by selling shares of stock of their company. Companies that want to list their stock on the NYSE have to meet both the U.S. Securities and Exchange Commission’s disclosure requirements for publicly traded companies and the specific listing requirements that the NYSE imposes. Start-up companies often seek to have their initial public offerings on the New York Stock Exchange to gain the prestige of having their shares traded alongside those of many of the top companies in the world.
How does the New York Stock Exchange Work?
Historically, traders would call out their orders to each other on the exchange trading floor, sometimes they would also use it to facilitate communication. Buyers would tell sellers what price they were willing to pay to buy a certain number of shares of stock, while sellers would name the prices to potential buyers what price they would be considering to accept for stock that they already owned. Once a buyer and seller agreed on a price for a certain number of shares of stock, a trade would occur and then the transaction would be reported on the exchange in a transparent manner that would help the stock market operate efficiently. Now, with the advancement of technology, there is electronic trading, NYSE-run computers are highly responsible for matching up buyers with sellers in real-time. Despite this new form of trading shares of stocks, electronic trading operates with the same fundamentals with investors placing orders saying at what price they’d be willing to buy or sell.
What are the things traded on the New York Stock Exchange?
The New York Stock Exchange operates seven liquid markets, providing investors with access to stocks, bonds, exchange-traded funds (ETFs), and other options as well. This also includes four distinct equities exchanges, each purpose-built to meet the needs of corporate and ETF issuers and offer better choices to investors in how they trade. There are four equity markets under NYSE; NYSE, NYSE American, NYSE Arca Equities, NYSE National, and NYSE Chicago. The NYSE equity market is the same as the stock exchange. NYSE American is designed to support younger, high-growth companies. NYSE America is the world’s leading market for small-cap companies. This equity market benefits from designated market makers, who provide market liquidity, and a fully integrated trading platform that supports efficient order matching. NYSE Arca Equities is the first all-electronic exchange in the U.S. It currently trades more than 8,000 exchange-listed securities and is ranked #1 in the listing and trading of exchange-traded products (ETPs). The market offers fully automated, transparent open and closing auctions in ETPs and significant price improvement opportunities at the midpoint in all securities. NYSE National is a fully electronic market that combines the high performance of NYSE Pillar technology with a “taker/maker” fee schedule. With the highest exchange deductions available for removing liquidity, NYSE National is an attractive trading venue for investors using fee-sensitive strategies to take liquidity or for passive traders seeking to minimize their time-to-fill. The last equity market that is a part of the New York Stock Exchange, NYSE Chicago, is an integral part of the National Market System. NYSE Chicago is an ideal opportunity for hedge funds, options market makers, quantitative traders, professional traders, and active individual traders that require immediate and electronic execution, in addition to serving the needs of traditional broker-dealer clients and the individual investors they represent.