Stock Markets

New York Stock Exchange (NYSE)

The New York Stock Exchange, commonly called the NYSE, is a stock exchange or a secondary market. With primary issuances of securities or financial instruments or the primary market, investors purchase these securities directly from issuers, such as corporations issuing shares in an IPO or private placement or directly from the federal government in the case of treasuries.

After the initial issuance, investors can purchase from other investors in secondary markets like the NYSE. If an investor wishes to buy a stock from Apple, for example, the actual company is not directly involved. Secondary markets can be further subdivided into auction or dealer markets, typified by the mode of transactions. The NYSE is an auction market. Buyers and sellers meet at a physical location (in this case, Wall Street) and announce bids or ask prices.

At the NYSE, traders gather around a specialist broker, who acts as an auctioneer in an open-outcry auction market environment to bring buyers and sellers together and manage the actual auction. The auction market format aims to efficiently bring together the parties with mutually agreeing prices. The auction process moved toward automation in 1995 through wireless handheld computers (HHC). The system enabled traders to receive and execute orders electronically via wireless transmission.

NYSE Trading Floor Buyers and sellers meet and engage in face-to-face transactions at the NYSE, an auction-style secondary market.

The NYSE is by far the world's largest stock exchange by market capitalization of its listed companies, at $14.242 trillion as of December 2011. Most of the largest US companies are listed on the NYSE. The NYSE's biggest competitor is NASDAQ; both are major secondary markets vying for large and profitable companies to list on their exchanges.

Secondary markets like the NYSE serve a vital function where companies can raise capital for expansion by selling shares to the investing public. They also gain advertising and a boost in prestige, which likely increases their stock value. To trade a security on the NYSE, it must be listed. To be listed on the New York Stock Exchange, a company must have issued at least a million shares of stock worth 100 million and must have earned more than 10 million over the last three years. They must also disclose certain information to the exchange, providing transparency that prevents insider manipulation of the stock prices.