On the Trading Floor
Date Added: July, 1999
By Chris Stallman
| E-mail
Imagine
people running across a floor in a frenzy, rushing to large booths
where computer screens are located everywhere. Once there, they
search for someone to buy or sell the stock of their choice and
they rush back to their booths, lined along the walls, to record
the trade. What you just imagined was a look into how the New York
Stock Exchange (NYSE) works.
In the late 1700's, some men signed an agreement
stating that they would buy and sell stocks among them. They started
by trading only one stock but the number has since grown to over
3,000 stocks! What they started came to be known as a stock exchange.
Like we've stated before, when you want to buy
a stock, you go to a broker. That broker then contacts a floor broker
to buy the stock. The floor broker rushes to the booth where that
stock is bought and sold and they buy the stock and rush back to
record the trade.
In order
to be able to trade stocks at the New York Stock Exchange, the floor
broker must purchase a "seat" on the trading floor. This
seat is just a permit that allows them to buy and sell stocks on
the exchange. The title itself is a little misleading because the
floor brokers are so busy buying and selling stocks that they rarely
have a chance to sit down. Seats on the NYSE don't come cheap
because there are so few of them. Currently, the average seat on
the New York Stock Exchange costs over $1 million per year and that
number rises each and every year. Recently, one sold for about $2.65
million!
The New
York Stock Exchange isn't the only stock exchange in the United
States. There are two more major stock exchanges, the NASDAQ and
the AMEX.
In the early 1970's, the National Association of
Security Dealers Automatic Quotation (NASDAQ) began trading. Unlike
the New York Stock Exchange, the NASDAQ involves no running or trading
between floor brokers. The NASDAQ is unique from the old style trading
of the New York Stock Exchange because it is all done electronically.
Yes, with just a click of a couple buttons, orders are sent to an
electronic stock exchange, where the stocks are bought and sold.
The NASDAQ is currently the largest stock exchange
in the United States. On many days, over one billion shares are
traded on the NASDAQ, which has almost 6,000 stocks listed on it.
The other major stock exchange found in the United
States is the American Stock Exchange (AMEX). This stock exchange
has been around for many years. It began when smaller companies
who wanted their stock to be traded couldn't get listed on the
New York Stock Exchange so they decided to trade their stock outside
on the streets of New York (and other cities, as well). Over time,
the AMEX was recognized as a leading stock exchange so they moved
indoors.
Like the NYSE, the AMEX trades stocks on a trading
floor. However, technology is always being added to the stock exchange
to make trading easier as more stocks are listed on the exchange.
Hopefully, now you have an understanding of how stocks
are bought and sold in different stock exchanges.
Previous
Article - Next Article
Like this article?
Bookmark
It
