A stock exchange is a corporation or mutual organization which provides physicalfacilities for stock brokers and traders, to trade company stocks and other securities. Stock exchanges also provide facilities for the issue and redemption of securities, as well as, other financial instruments and including the payment of income and dividends. The securities traded on a stock exchange include: shares issued by companies, unit trusts and other pooled investment products and bonds. To be able to trade a security on a certain stock exchange, it has to be listed there. Usually there is a local and central location at least for recordkeeping, but trade is less and less linked to such a physical place, as modern markets are now reallyelectronic networks, which gives them advantages of speed and the lower overallcost of transactions. Trade on an exchange is by members, only those being stock and share holders. The initial offering of stocks and bonds to investors is by definition done in the primary market and subsequent trading is done in the secondary market. A stock exchange is often the most important component of the stock market.Increasingly more and more stock exchanges are part of a global market for securities.
The most prominent of stock exchanges must be the New York Stock Exchange (NYSE).The New York Stock Exchange, is nicknamed the “Big Board,”and is a New York City-based privately-owned stock exchange by the NYSE Group.By dollar volume it is the largest stock exchange in the worldand has the second largest by number of companies listed. Its share volume was exceeded by that of NASDAQ during the 1990s, but the total market capitalization of companies listed on the NYSE is five times that of companies listed on NASDAQ. The New York Stock Exchange lists a global capitalization of $17.4 trillion, including $7.1 trillion in non-U.S. companies.
A merger with the fully electronic stock exchange Archipelago Holdings formed the New York Stock Exchange. The New York Stock Exchange is composed of five rooms used for the facilitation of trading with the trading floorbeinglocated at 11 Wall Street. The main building is located at 18 Broad Street, between the corners of Wall Street and Exchange Place and islisted on the National Register of Historic Places. There is one podium or desk on the trading floor for each of the exchange’s three thousand or so stocks. Trades on the floor of the New York Stock Exchange always involve a interpersonal interaction.
The NYSE trades are done in a continuous auction format.Each listed stock trades in one specific location.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 a 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.Most of the timebuyers and sellers meet in a market that provides efficient price discovery in an auction environment that is designed to produce the fairest price for both parties.This has always been the goal of any stock exchange. What differentiates the NYSE from fully electronic markets is the human interaction and expert judgment as to order execution. However, in excess of 50% of all order flow is now delivered to the floor electronically. Recent proposals have been made to adopt a hybrid market structure combining elements of open outcry and electronic markets.This may be the wave of the future as technology becomes faster and more interpersonal even in a stock exchange.