Historically, the stock market has been a symbol of the economic health of the United States, and one of the top and largest stock markets of the world is the New York Stock Exchange. The New York Stock Exchange lists over 2,800 companies and has been the heart of stock trading for many years. But how does it all work?
The New York Stock Exchange is developed to be an agency auction market system which allows people to meet with other people as much as possible. Buyers and sellers of stock meet to openly “auction off” specific stocks to a price compromise between the highest bid a buyer is willing to pay and the lowest bid a seller is willing to sell. Most of the transactions in the New York Stock Exchange are done without the involvement of the dealer, or company to which the stock is resident.
Specialists – known as specs – make markets and work on the New York Stock Exchange to facilitate issues in a fair and orderly manner, such as trades between buyers and sellers. Specs are not allowed to make trades for their own accounts when there are public bids and offers on the floor. Because the New York Stock Exchange has very strict regulations on the stability, specs are also responsible for recovering occurrences of imbalance between supply and demand. The New York Stock Exchange specs are supervised by the Market Surveillance and are required to keep the market as evenhanded as possible.
Specs in the New York Stock Exchange handle approximately six issues a piece, though a very large stock may sometimes have a spec dedicated only to it. Both common stocks and preferred stocks are represented by specs in the New York Stock Exchange. Trading will only occur at the post on the New York Stock Exchange floor of the spec assigned to that stock. If you are interested in becoming a specialist, the best route to go is to start in a clerk position for a specialist firm and then work your way up to becoming a broker. Then you too could be involved on the floor of the New York Stock Exchange.
As for the companies listed on the New York Stock Exchange, they too are subjected to specific guidelines for the opportunity to be listed on this prestigious market. Some of the rules for domestic companies include having national interest and at least 1.1 million shares held publicly. Also, domestic companies are required to have a net income in the latest year of $2.5 million before federal taxes and at least $2 million in each of the preceding two years. The New York Stock Exchange expects respect and adherence to outside directors, audit committee organizations, voting rights, and related party transactions by the companies it lists. Companies pay initial and annual fees to the New York Stock Exchange for their place as well. The New York Stock Exchange has a proven track record and is an excellent choice for investing.
By Monica Drusch