New York Stock Exchange (NYSE)
Traders execute stock transactions on behalf of investors by means of a continuous auction format on the trading floor of the NYSE. In this open outcry form of trading, a specialist broker, who is an employee of a member company, performs the function of an auctioneer, bringing together buyers and sellers in what has been described by the uninitiated as “organized chaos”. However, each person on the trading floor knows exactly what their function is and trade worth millions of dollars takes place on a daily basis.
Effective January 24, 2007, all NYSE stocks, with the exception of an elite group of high-priced stocks, could be traded electronically, with customers having the choice of sending orders for immediate execution electronically, or routing orders to the trading floor’s auction market. While the trading floor has the benefit of the expert judgment of highly experienced specialists, the electronic method has the advantage of speed, and in the fast-paced world of investing speed appears to be winning out over experience.
The NYSE makes use of the Dow Jones Industrial Average and NYSE Composite Index, with the latter being created in the mid-1960s to reflect the value of all stocks traded at the exchange, whereas the Dow represents 30 of the largest publicly-owned U.S. companies. Originally created with a base value of 50 points equal to the 1965 yearly close, in 2003 the base value was revised to 5,000 points equal to the 2002 yearly close.
Established in 1792, when 24 stock brokers on the sidewalk, under a buttonwood tree outside 68 Wall Street, signed the Buttonwood Agreement, the NYSE has a long and interesting history, remaining at the forefront of securities trading in the U.S. for more than 200 years.