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Published on: 01 Apr 2017 by patricia999
The New York Stock Exchange (NYSE) is the largest stock
exchange in the United States. It's recent acquisition of the fully automated
stock exchange Archipelago formed a new company, the NYSE Group, which later
became a for-profit organization and traded in March 2006.
The New York Stock Exchange consists of hundreds of member
firms that must meet high standards. These member firms employ specialists and
brokers who have permission to trade securities on the NYSE. The stock market
is a market in which buyers and sellers from all over the world come together
to trade stocks. Therefore, investor protection plays an important role in all
regulatory requirements. Regulatory requirements are high.
The NYSE is a self-regulated organization but always under
the supervision of the SEC, the Securities and Exchange Commission. There is
also the Securities Investor Protection Corp, which was established in 1970 by
the United States Congress. The SIPC covers losses of up to $ 500,000 in the
event of a brokerage firm breaching.
The New York Stock Exchange differs from other stock
exchanges. Its so-called open crying system is an auction market where the
specialist buys and sells orders at the best possible price. There are several
trading positions on the NYSE trading floor. Each position is responsible for
more than 100 different actions. Each listed company is assigned to a
specialist who must market the stock and act as intermediaries between buyers
and sellers. Only NYSE specialists and floor brokers can negotiate on the
floor. The floor broker acts as an agent for public orders while specialists
match the orders of the brokers.
It is often said that the auction system is not efficient
compared to fully automated exchanges like the NASDAQ but NYSE specialists and
brokers could handle up to 10 million shares a day. The record day so far was
3.1 billion shares on June 24, 2005. The NYSE also recently introduced a new
market system, the NYSE Hybrid Market, which will combine the traditional
market system with automated trading
There are different studies with different results. One says
NYSE is better, the other says NASDAQ is. However, it is difficult to compare
different systems. Orders run faster on the NASDAQ because of human
intervention on the NYSE. But faster does not mean always better. The
commercial floor has advantages although it is slower. One study says that
because of the noncompetitive specialist system of the NYSE the costs to
investors would be higher. Another study says that the spread on the New York
Stock Exchange is lower than on the NASDAQ, especially with large stocks.
For the average investor differences are only found in the
details and barely play a role today as the trading costs have declined
significantly in recent years.