How The Stock Market Works Today

The New York Stock Exchange Stocks are traded

on the “floor” About the size of a

football field Contains hundreds

of brokers, clerks and assistants

Who Can Trade?

You must first be accepted for membership The number of memberships is limited to

1,366 The price of a seat is based on demand

During the 1977 recession--$35,000 Late 1990s—as high as $4 million In 2005—$3.25 million

Today the NYSE sells one-year licenses to trade directly on the exchange

Stock Exchange Members

Floorbrokers Largest group 2 Groups within this group

Commission brokers Employed by brokerage firms that are members of

the exchange Independent brokers

Work for themselves and handle orders for brokerage firms that do not have full-time brokers or whose brokers are too busy to handle all their business

Allied Members

General partners or voting stockholders of a member firm of the exchange

Not personally members Cannot do business on the trading

floor

Specialists

An exchange member who is an expert in several stocks

Trades only in those stocks If a person wishes to buy or sell one

of the particular stocks they will find the specialist

The Stock Exchange Officers Board of Directors

12 public representatives 12 exchange members 1 full-time paid chairman An executive vice-chairman A president

The American Stock Exchange Has the second largest volume of trading

in the United States Located near the NYSE at 86 Trinity Place

in New York In general trades stocks of smaller

companies than the NYSE Offers more personal service than the

NYSE

Over-the-Counter Markets

The majority of U.S. stocks are traded over-the-counter

It consists of an “electronic marketplace”

Brokers use computers to make trades through a network called the National Market System (NMS)

Pink Sheet Stocks

Not part of the NMS Information about these stocks given in

Pink Sheets Daily publication printed on pink paper Put out by the National Quotation Bureau Given the bid and asked price for thousands of

OTC stocks not listed in financial publications Also gives the name and phone number or firm

NASDAQ

National Association of Security Dealers Automated Quotations

Over–the-Counter stocks that are listed in the newspaper are listed under NASDAQ

Only the most actively traded are listed

Regional Exchanges

Located in major cities List regional or local stocks List stocks on the NYSE and AMEX Increases the number of hours when

stocks can be traded

Intermarket Trading System A video-computer system Links eight of the regional markets together

New York American Boston Cincinnati Midwest Philadelphia Pacific NASD

Foreign Markets

Enables stock trading any hour of the day or night

Leading European Exchanges London Paris Frankfurt

Leading Far East Exchanges Tokyo Hong Kong Singapore

Chinese Stocks

Only a few small exchanges Open only a few hours a week Operate in

Beijing Shanghai Shenyang

Sell just a handful of stocks Not available to foreigners