The New York Stock Exchange
When I started out as a newly minted broker, I thought my financial future would be buying and selling stocks.
I was so committed to my career I bought a customized license plate that says “NYSE4ME”. I still have it.
The New York Stock Exchange was my dream destination.
Founded 225 years ago the NYSE is the oldest and largest equity exchange in the world.
There are 2800 + companies listed on the Exchange. The combined market capitalization is $26.64 trillion.
Over 2 billion shares are traded daily.
An exchange acts as the intermediary between buyers and sellers.
Over the years I have had more than a few visits to the Exchange. And over the years there have been quite a few changes at the Exchange.
Electronic trading has largely replaced traders on the floor.
Where do trades go, electronically? Ever heard of Mahwah, New Jersey ? It is the data center for the NYSE and Nasdaq.
When you go to the floor of the Exchange now, no one is screaming or shouting or acting out. Darn, it was so much fun to watch.
At the NYSE there is still a human touch with Designated Market Makers [1].
Companies that are going public still ring the opening bell. And there is a closing bell. There is an entire history of bell ringing [2]
What hasn’t changed is the role of the exchange . And what do we care about? Getting the best price regardless of the exchange a stock is traded on.
“The National Best Bid and Offer (NBBO) is a quote that reports the highest bid price and lowest ask (offered) price in a security, sourced from among all available exchanges or trading venues. The NBBO, therefore, represents the tightest composite bid-ask spread in a security.
The Securities Exchange Commission’s (SEC) Regulation NMS requires brokers to trade at the best available ask and bid price when buying and selling securities for customers and guarantee at least the NBBO quoted price to its customers at the time of a trade.”
National Best Bid and Offer (NBBO) Definition (investopedia.com)
Today there are 20 active exchanges in the U.S. [3]
There are exchanges for options, futures, commodities, stocks, and bonds .
The second largest exchange is Nasdaq. Before you start googling, Nasdaq stands for National Association of Securities Dealers Automated Quotations.
Unlike the NYSE, there is no trading floor for Nasdaq. Nasdaq is fully automated.
Nasdaq was founded in 1971. Today there are 3,300 companies listed on Nasdaq with a market capitalization of $23.46 trillion.
The exchanges have minimum requirements for listing. It’s a high bar with the NYSE.
If I want to bring my company public through an IPO, it is going to cost me a lot more to list with the NYSE.
I will need to have 1.1 million shares outstanding with a collective market value of $100 million.
Every year I am going to pay a fee that ranges from $150 thousand to $295 thousand.
If I am a new company without much capital, I won’t be able to list on the NYSE.
One alternative is to go to Nasdaq. Nasdaq Capital Markets has the lowest fees.
The initial fee to list is $55 thousand to $80 thousand depending on the number of shares outstanding. The annual fee is $43 thousand to $77 thousand.
The NYSE and Nasdaq: How They Work (investopedia.com)
Companies like Google, Apple, Amazon and now Meta (Facebook) are all listed on Nasdaq.
Recent IPOs on Nasdaq include Robinhood and Duolingo.
What about Coinbase? Trick question. Coinbase is an exchange for cryptocurrency.
Does the Facebook name change to Meta mean FAANGs are now MAANGs?
Nasdaq is thought of as the exchange for growth companies. Growth implies higher volatility in share prices.
The NYSE is thought of as the place for stable “blue chip” companies.
Or it used to be. Not anymore. A quick visit to their website shows that the NYSE is “in it to win it” with technology company listings.
The bottom line is that new exchanges are popping up and all the exchanges are vying for new company listings.
An exchange is a business. You can buy shares of an exchange.
The NYSE is owned by Intercontinental Exchange, Inc., which issues shares under the ticker symbol, (NYSE: ICE).
Nasdaq, Inc. is an American multinational financial services corporation that owns and operates three stock exchanges in the United States (NASDAQ: NDAQ)
And now Coinbase ( NASDAQ:COIN)
Final story about my license plate.
One day I saw two men staring at my license plate. As I approached , they asked what the plate meant, they got as far as “New York”.
I said “New York Stock Exchange for Me” to which one of the men said “Oh, is your husband a broker? To which I said “ No, I am a broker” and they were like “oops” and “guess we are not politically correct” Too right.
I started out in an office of 30 brokers, 29 of them were men. When they saw my license plate some of them were incensed, mainly because they didn’t think of it first.
One broker however, wanted to buy my plates. This broker was an ex-mortician, who reminded me of Peter Lorre.
If you have seen “The Maltese Falcon” or “M” you know who Peter Lorre is.[4]
“Flash Boys” by Michael Lewis is a fascinating study ( in depth) of high frequency trading and I would say “price discovery” at a millisecond level. Flash Boys is also the story of Brad Katsuyama who started a new exchange called IEX in 2012.
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[1]
What Is a Market Maker?
The term market maker refers to a firm or individual who actively quotes two-sided markets in a particular security, providing bids and offers (known as asks) along with the market size of each.
Market makers provide liquidity and depth to markets and profit from the difference in the bid-ask spread. They may also make trades for their own accounts, which are known as principal trades.
The New York Times article on Peter Lorre
“When Peter Lorre squinted his baleful brown eyes and took a slow sinister puff on a cigarette, moviegoers throughout the world squirmed in their seats. On the screen, the actor seemed to be the image of subsurface malevolence, and his pale, almost pasty, moonface seemed to conceal a homicidal maniac with a temporary but firm grip on himself.”
National Best Bid and Offer (NBBO) Definition (investopedia.com)
Daily Stock Market Overview, Data Updates, Reports & News | Nasdaq
[3] List of Current exchanges in the U.S.
This website is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation for any security, nor does it constitute an offer to provide investment advisory or other services by The Modest Economist LLC.
