The New York Stock Exchange
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The New York Stock Exchange: An Overview
Introduction
The New York Stock Exchange (NYSE), often referred to as the "Big Board" or simply "Wall Street," is located at 11 Wall Street in New York. It is the largest stock exchange in the United States based on dollar volume and total market capitalization of the companies listed. In contrast, the NASDAQ, a fully electronic stock exchange, leads by share volume.
Operations and Structure
The NYSE is managed by the NYSE Group, which also oversees the NYSE Arca, formerly the Archipelago Exchange. After acquiring Archipelago in December 2005, the NYSE Group became public in March 2006 under the symbol NYX.
Hosting over 2,600 companies with a combined market value of approximately $21 trillion, the NYSE includes significant contributions from non-U.S. companies totaling over $7 trillion. To maintain quality, companies must meet stringent listing requirements, including specific benchmarks in shareholder numbers, trading volume, market capitalization, earnings, and cash flow.
Trading Process
Unique to the NYSE is its open outcry system, where trades are facilitated by a specialist on the trading floor, who acts as an auctioneer to match buyers and sellers for specific stocks. This contrasts with the NASDAQ’s fully electronic system.
The Dow Jones Industrial Average
The Dow Jones Industrial Average (DJI), often called the "Dow Jones" or just the "Dow," is the NYSE's most famous index. Created by Charles Dow, founder of Dow Jones & Company, it was first calculated on October 1, 1928. The index tracks 30 major stocks, including Microsoft, Pfizer, AT&T, and IBM, and is price-weighted. Some argue the S&P 500 index offers a better market overview due to its broader scope.
Historical Market Declines
The Dow has experienced several significant declines. One of the most notable drops occurred on October 12, 1914, with a 24.39% fall in a single day. Another major decline happened on October 19, 1987, known as Black Monday, with a 22.6% drop. The largest point decrease was on September 17, 2001, with a loss of 684.81 points or 7.1%.
In response to market volatility, the NYSE has implemented the circuit breaker rule, which halts trading if the market drops by 10%, 20%, or 30%, allowing investors time to reassess their positions.
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