New York Stock Exchange (NYSE): Definition, History, and Purpose

New York Stock Exchange Definition
New York Stock Exchange (NYSE): Definition, History, and Purpose

The new york stock exchange (NYSE) is the biggest stock market in the world. NYSE is a marketplace that mainly trades stocks of companies that are listed in the United States of America. The NYSE is physically located on the famous wall street in New York City and is owned by Intercontinental Exchange. 

NYSE is the biggest stock market in the world on the basis of market capitalization. Market capitalization is the value of all the stocks listed on a stock exchange. It is calculated by multiplying the total number of stocks by their value. 

NYSE has a history spanning over 200 years, with many of the prestigious companies in the world deciding to list on the NYSE. The beginning of the NYSE can be traced back to the famous buttonwood agreement in 1792. The agreement was a response to the uneasiness in the trading sector as a set of rules guiding the stock market investment. 

NYSE is one of the main components of the world’s economy today. It stands tall as the torch bearer of the stock market in the U.S, with the aim of upholding transparency in trading. 

What is NYSE?

The New York Stock Exchange (NYSE) is one of the stock exchanges in the United States of America. A stock exchange is a security marketplace where different securities, including stocks of different companies, are sold and bought. NYSE has a notable presence in world economics, especially as the largest stock exchange in the world. NYSE is the only stock exchange in the world where floor trading is still practiced in a practical manner. 

NYSE is owned by a company named Intercontinental Exchange which also lists on the NYSE. NYSE is a leader in terms of the number of listed companies, too, with the number touching 2800 and counting. 

How does the NYSE start?

The New York Stock Exchange today is one of the most important monuments in the world economy. But it has an equally interesting and rich history as well.

Back in the late 1700s, the biggest problem traders faced was a lack of regulation, which led to many malpractices. 24 traders met near a buttonwood tree in early 1792 to form regulations for fair trade. This led to the creation of the NYSE that we know today, and the buttonwood tree turned into today’s Wallstreet. 

The exchange was formally formed and named as New York Stock and Exchange Board in 1817. The current name change came into being in 1863. 

NYSE was initially open only for members, but increased demand and trading activity made NYSE open for more members. Today, NYSE is the largest stock exchange in terms of market capitalization and among the leaders in terms of per-day trading activity. 

How does the NYSE work?

The NYSE employs two methods of trading. The first is the electronic method of trading, which is more popular now, and the second is the floor trading method. Floor trading is the traditional method of trading where brokers and traders have to be physically present in the stock exchange to be able to trade. 

But regardless of how the trade is conducted, NYSE adopts an auction method for trading. 

In the case of floor trading, brokers will be present on the NYSE, representing traders. Buyers and sellers conduct a real-time auction to find the perfect price. 

Brokers set the bid price. This is the price the buyer is willing to sell the stock for. At the same time, sellers put out an ‘ask; price, which is the price the seller is looking for. A sale is completed only when the seller finds a buyer who is willing to buy the stock for a price that is reasonable for both. 

But over 95% of the stock market trading on NYSE happens electronically today. You can sit back at your home, log in from a broker’s website, and buy or sell stocks right from the comfort of your home. In the case of electronic trading in the NYSE, the computer acts as the matchmaker, and buyers and sellers are matched in a matter of seconds. On rare occasions where there are not enough buyers or sellers, a trader may have to wait for a few minutes for the transaction to be complete. 

What is the purpose of the NYSE?

The NYSE has three main purposes. They are listed below.

  • Maintaining ease of trade – The main purpose of the NYSE is to enable a seamless trading experience for all stock market participants. The NYSE makes sure it has all the technical capability as well to ensure a seamless experience. NYSE also has several algorithms in place to ensure factors such as pricing, matching, etc., are done with utmost efficiency. 
  • Ensuring a safe place for all the market participants – NYSE was formed to ensure equal opportunity for all market participants, including traders and companies. NYSE does this by making sure there are no malpractices going on on the platform. 
  • Evaluation of companies, securities, traders, and brokers – The market participants have to follow the rules and regulations to ensure the seamless working of the stock exchange. NYSE evaluates and audits different market participants to ensure the same. 

What are the trading hours on NYSE?

NYSE has set working hours. As of now, the NYSE works from  Monday to Friday from 9:30 a.m. to 4:00 p.m. Eastern time. But the NYSE will be closed on certain U.S. holidays. The NYSE will be closed on the preceding Friday If the holiday falls on a Saturday. The following Monday will be a holiday when the holiday falls on a Sunday. 

Does NYSE have holidays?

The NYSE is closed on certain U.S holidays. The list of holidays may differ in different years. Below is the list of NYSE market holidays in 2022.

MondayJan 17, 2022M L King Day
MondayFeb 21, 2022Presidents’ Day
FridayApr 15, 2022Good Friday
MondayMay 30, 2022Memorial Day
MondayJul 04, 2022 Independence Day
MondaySep 05, 2022Labor Day
ThursdayNov 24, 2022Thanksgiving
MondayDec 26, 2022Christmas

Is NYSE and Nasdaq the same?

Nasdaq is a U.S. stock exchange based in New York City, similar to the NYSE. Nasdaq is a similar but completely different entity, Nasdaq has its own set of listings. Some companies in the U.S have been listed on both NYSE and Nasdaq. The NYSE is bigger in size when compared to Nasdaq, but it still has a significant role in the world economy. 

What is the difference between NYSE and Nasdaq?

Below are the main differences between NYSE and Nasdaq

  • Even though NYSE is the larger stock exchange based on market capitalization, Nasdaq has more listings (close to 3500) compared to NYSE (close to 2800).
  • NYSE is considered an auction stock exchange, while Nasdaq is a deal stock exchange. In an auction exchange, the highest bid for a stock gets matched with the lowest ask price. In a dealer exchange, the matching happens automatically through electronic systems. 
  • NYSE is considered to be a stock exchange for fundamentally strong companies, while Nasdaq attracts more growing companies.

Even with the differences, the NYSE and Nasdaq continue to be two strong pillars of the world economy. 

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