The New York Stock Exchange (NYSE) is a stock exchange based in New York City. It is the largest stock exchange in the world by dollar volume and has 2,764 listed securities. It ranks fourth in the world in terms of company listings with 3,200 companies, behind the Bombay Stock Exchange (BSE) of India, London Stock Exchange and NASDAQ. As of December 31, 2006, the combined capitalization of all New York Stock Exchange listed companies was $25.0 trillion.
The NYSE is operated by NYSE Euronext, which was formed by the NYSE's merger with the fully electronic stock exchange Euronext. The New York Stock Exchange trading floor is located at 11 Wall Street, and is composed of four rooms used for the facilitation of trading. A fifth trading room, located at 30 Broad Street, was closed in February 2007. The main building, located at 18 Broad Street between the corners of Wall Street and Exchange Place, was designated a National Historic Landmark in 1978.
As of January 24, 2007, all NYSE stocks can be traded via its electronic Hybrid Market (except for a small group of very high-priced stocks). Customers can now send orders for immediate electronic execution, or route orders to the floor for trade in the auction market. In excess of 50% of all order flow is now delivered to the floor electronically.
On the trading floor, the NYSE trades in a continuous auction format. Here, the human interaction and expert judgment as to order execution differentiates the NYSE from fully electronic markets. There is one specific location on the trading floor where each listed stock trades. Exchange members interested in buying and selling a particular stock on behalf of investors gather around the appropriate post where a specialist broker, who is employed by an NYSE member firm (that is, he/she is not an employee of the New York Stock Exchange), acts as an auctioneer in an open outcry auction market environment to bring buyers and sellers together and to manage the actual auction. They do on occasion (approximately 10% of the time) facilitate the trades by committing their own capital and as a matter of course disseminate information to the crowd that helps to bring buyers and sellers together. The frenzied commotion of men and women in colored smocks has been captured in several movies, including Wall Street.
In the mid-1960s, the NYSE Composite Index was created, with a base value of 50 points equal to the 1965 yearly close, to reflect the value of all stocks trading at the exchange instead of just the 30 stocks included in the Dow Jones Industrial Average. To raise the profile of the composite index, in 2003 the NYSE set its new base value of 5,000 points equal to the 2002 yearly close. (Previously, the index had stood just below 500 points, with lifetime highs and lows of 670 points and 33 points, respectively.)
The right to directly trade shares on the exchange is conferred upon owners of the 1366 "seats". The term comes from the fact that up until the 1870s NYSE members sat in chairs to trade; this system was eliminated long ago. In 1868, the number of seats was fixed at 533, and this number was increased several times over the years. In 1953, the exchange stopped at 1366 seats. These seats are a sought-after commodity as they confer the ability to directly trade stock on the NYSE. Seat prices have varied widely over the years, generally falling during recessions and rising during economic expansions. The most expensive inflation-adjusted seat was sold in 1929 for $625,000, which, today, would be over six million dollars. In recent times, seats have sold for as high as $4 million in the late 1990s and $1 million in 2001. In 2005, seat prices shot up to $3.25 million as the exchange was set to merge with Archipelago and become a for-profit, publicly traded company. Seat owners received $500,000 cash per seat and 77,000 shares of the newly formed corporation. The NYSE now sells one-year licenses to trade directly on the exchange.
The first central location of the NYSE was a room rented for $200 a month in 1817 located at 40 Wall Street. The NYSE was destroyed in the Great Fire of New York (1835). It moved to a temporary headquarters. In 1863 it changed its name to the New York Stock Exchange (NYSE). In 1865 it moved to 10-12 Broad Street. The Dow Jones Industrial Average (DJIA) was created by Dow Jones & Company, a financial news publisher, in 1896.
The volume of stocks traded increased sixfold in the years between 1896 and 1901 and a larger space was required to conduct business in the expanding marketplace. Eight New York City architects were invited to participate in a design competition for a new building and the Exchange selected the neoclassic design from architect George B. Post. Demolition of the existing building at 10 Broad Street and the adjacent lots started on 10 May 1901.
The New York Stock Exchange building opened at 18 Broad Street on April 22 1903 at a cost of $4 million. The trading floor was one of the largest volumes of space in the city at the time at 109 x 140 feet (33 x 42.5 m) with a skylight set into a high ceiling. The main façade of the building features marble sculpture by John Quincy Adams Ward in the pediment, above six tall Corinthian capitals, called “Integrity Protecting the Works of Man”. The building was listed as a National Historic Landmark and added to the National Register of Historic Places on June 2, 1978.
In 1922, a building designed by Trowbridge & Livingston was added at 11 Broad Street for offices, and a new trading floor called "the garage". Additional trading floor space was added in 1969 and 1988 (the "blue room") with the latest technology for information display and communication. Another trading floor was opened at 30 Broad Street in 2000. With the arrival of the Hybrid Market, a greater proportion of trading was executed electronically and the NYSE decided to close the 30 Broad Street trading room in early 2006. In late 2007 the exchange closed the rooms created by the 1969 and 1988 expansions due to the declining number of traders and employees on the floor, a result of increased electronic trading.
The 11 Wall Street building was designated a National Historic Landmark in 1978.
The Black Thursday crash of the Exchange on October 24, 1929, and the sell-off panic which started on Black Tuesday, October 29, are often blamed for precipitating the Great Depression of 1929. In an effort to try to restore investor confidence, the Exchange unveiled a fifteen-point program aimed to upgrade protection for the investing public on October 31, 1938.
On October 1, 1934, the exchange was registered as a national securities exchange with the U.S. Securities and Exchange Commission, with a president and a thirty-three member board. On February 18, 1971 the non-profit corporation was formed, and the number of board members was reduced to twenty-five.
One of Abbie Hoffman's well-known protests took place on August 24, 1967, when he led members of the movement to the gallery of the New York Stock Exchange (NYSE). The protesters threw fistfuls of dollars (most of the bills were fake) down to the traders below, some of whom booed, while others began to scramble frantically to grab the money as fast as they could. Hoffman claimed to be pointing out that, metaphorically, that's what NYSE traders "were already doing." "We didn't call the press," wrote Hoffman, "at that time we really had no notion of anything called a media event." The press was quick to respond and by evening the event was reported around the world. Since that incident, the stock exchange has spent $20,000 to enclose the gallery with bulletproof glass.
On October 19, 1987, the Dow Jones Industrial Average (DJIA) dropped 508 points, a 22.6% loss in a single day, the second-biggest one-day drop the exchange had experienced, prompting officials at the exchange to invoke for the first time the "circuit breaker" rule to halt all trading. This was a very controversial move and led to a quick change in the rule; trading now halts for an hour, two hours, or the rest of the day when the DJIA drops 10, 20, or 30 percent, respectively. In the afternoon, the 10% and 20% drops will halt trading for a shorter period of time, but a 30% drop will always close the exchange for the day. The rationale behind the trading halt was to give investors a chance to cool off and reevaluate their positions. Black Monday was followed by Terrible Tuesday, a day in which the Exchange's systems did not perform well and some people had difficulty completing their trades.
There was a panic similar to many with a fall of 7.2% in value (554.26 points) on October 27, 1997 prompted by falls in Asian markets, from which the NYSE recovered quickly.
On January 26, 2000, an altercation during filming of the music video for Sleep Now in the Fire, which was directed by Michael Moore, caused the doors of the exchange to be closed and the band, Rage Against the Machine, to be escorted from the site by security, after band members attempted to gain entry into the exchange. Trading on the exchange floor, however, continued uninterrupted.
On September 17, 2003, NYSE chairman and chief executive Richard Grasso stepped down as a result of controversy concerning the size of his deferred compensation package. He was replaced as CEO by John S. Reed, the former Chairman of Citigroup. The NYSE announced its plans to acquire Archipelago on April 21, 2005, in a deal intended to reorganize the NYSE as a publicly traded company. NYSE's governing board voted to acquire rival Archipelago on December 6, 2005, and become a for-profit, public company. It began trading under the name NYSE Group on March 8, 2006. A little over one year later, on April 4, 2007, the NYSE Group completed its merger with Euronext, the European combined stock market, thus forming the NYSE Euronext, the first transatlantic stock exchange.