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On the Trading Floor

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.

Discuss It!

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I was not aware of the facts about the stock exchanges and the different processes happening there. Now I am so much glad that I have improved my knowledge on this stock exchange through this article. So the broker has a great role in these stock exchanges.

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Rd - Error Code 20 said:

Just some good information to know, I suppose. I will be trading in stocks pretty soon, but will never be on the trade floor, though I have seen enough movies to know what it's like.

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