What is the NYSE (New York Stock Exchange)?
A brief history of the NYSE
The Buttonwood Agreement is believed to be the origin of the New York Stock Exchange. 23 brokers signed it in 1793 in order to set a standard commission rate and ensure that trading preference is given to members of the agreement. The first stocks traded on the NYSE were those of the Bank of North America and the Bank of New York. Later, the Open Board of Stock Brokers was launched to compete with the New York Stock Exchange, but the two exchanges ended up merging in 1870.
Increased regulation was introduced following the depression that started in 1929, a result of a brutal stock market crash. Over the years, the NYSE's trading floor has changed. In 2021, the NYSE became an electronic-only trading platform, due to the coronavirus pandemic. For the first time ever, the trading halls were closed while the market remained open, but they have since reopened.
Today, visitors can take live tours of the floor of the NYSE, or view videos of its trading floor which are posted on the internet.
Wall Street stock indices
There are several stock market indices that track the prices of groups of stocks on the New York Stock Exchange. Here are the bigger ones:
- NYSE COMPOSITE (DJ) - The NYSE Composite lists the common securities of the New York Stock Exchange. It is capitalisation-weighted, which means that securities are weighted according to their value.
- NYSE ARCA TECH 100 - this is a price-weighted index that contains the 100 top US tech stocks. Although the index is managed by the NYSE, it also includes stocks listed on other exchanges.
- DOW JONES INDUSTRIAL AVERAGE - The Dow Jones is made up of the US's 30 biggest companies. It is one of the most followed indices, although many think it doesn't provide a good representation of the overall US stock market, especially when compared to other indices like the S&P 500. The value of the index is the total price of the securities in the index divided by a factor that is updated each time a company does a stock split. Thus, the index's value is unchanged by the division.
- S&P 500 - The Standard and Poor's 500 tracks the 500 largest American companies. It is capitalisation-weighted and is one of the most followed US indices.
- THE NYSE BITCOIN INDEX - The NYXBT represents the value of a bitcoin in USD, based on Bitcoin transactions that meet the NYSE's criteria.
What else do I need to know about the Wall Street markets?
The NASDAQ vs the NYSE
The NYSE is an auction market, which means that traders directly sell to and buy from each other. It is different from the NASDAQ stock exchange, which is more of a brokerage market and therefore has designated market makers to maintain liquidity. The NYSE is more industry-focused, unlike the NASDAQ which focuses on technology, and therefore tends to have more established and stable stocks. For this reason, some investors view the NYSE as a less risky investment environment.
NYSE Pillar
NYSE Arca is a subsidiary of the NYSE group and is an electronic communications network (ECN) which matches orders, unlike the NYSE which is both a physical and an electronic exchange. NYSE Arca is the leading marketplace for ETFs (exchange-traded funds).
NYSE American (also known as AMEX), is an exchange for small and medium-sized businesses that traditionally can't meet NYSE's stringent listing requirements.
However, NYSE Pillar is a new integrated trading platform that allows members to access the NYSE, NYSE American Equities, NYSE Arca Equities, NYSE Chicago, NYSE National, NYSE Arca Options and NYSE American Options. NYSE Pillar therefore offers a wider selection of stocks, containing the 8,000 stocks listed on all US stock exchanges. Trading hours remain the same for the Arca, American, Pillar and Options NYSE exchanges.
Bands A, B and C
Bands A, B and C are used to classify the various types of stocks that can be traded:
- Band A - NYSE-listed stocks.
- Band B - regional stocks (mainly listed on Arca).
- Band C - NASDAQ-listed stocks that can also be traded on the NYSE.
How does it all work?
Below, we'll examine some of the NYSE's main features:
A trading floor for stocks
Easily identified thanks to their uniform jackets, floor brokers provide info and execute their clients' orders by "open outcry". This is the use of yells and hand signals on the NYSE's floor to provide information about orders. However, since the 80s, auction exchanges have been increasingly replaced by electronic trading platforms - although the jobs and jackets still exist.
Algorithmic trading
Algorithmic trading is used for high volume trades and is the way most trades are concluded these days. The NYSE defines algorithmic trading as buying or selling 12 or more stocks with a purchase value greater than $1 million that are part of a coordinated trading strategy. These transactions are all recorded in a scheduled trading report. However, such trading is believed to contribute to market volatility and to be at fault for the stock market crashes of the 80s and 90s.
Trading restrictions
NYSE trading rules can suspend trading in the market in the event of a significant shift in price that could eliminate liquidity. These trading suspension rules are known as Market Wide Circuit Breakers, which either temporarily stop trading or block the market's opening in extreme cases. NYSE market stops are triggered by measurements of index declines.
A recent example of this rule is the Gamestop trading interruption, which was implemented due to extremely high trading volatility and volumes.
Reports
A volume summary report contains charts of trading volumes as well as stock market activity data (which includes stock sizes, the number of trades, etc.). These overviews are available on the NYSE website, with both 2020 and 2021 showing record highs in terms of options trading volume and growth.
Federal agency regulation
Although the NYSE's regulatory agency is responsible for overseeing trading activity in each market, certain regulatory functions are performed by other entities such as the SEC or the FINRA, which define trading rules and limits, including insider trading rules.
Major players within the NYSE
The biggest stocks on the NYSE in terms of dollar value are Microsoft, JPMorgan Chase and Facebook.
The requirements for listing on the New York Stock Exchange are that a company must have a volume of at least 1.1 million shares traded with a market value of over $100 million, as well as a minimum price of $4/share. NYSE stocks that trade below a dollar for more than one month risk being removed from the list of publicly traded companies.
Each listed stock is also represented by unique symbols, for example NYSE: JPM stands for JPMorgan Chase and NYSE: JNJ stands for Johnson & Johnson.
What are the benefits to trading Wall Street's stock markets?
There are several benefits to trading on the NYSE:
- Liquidity - the NYSE offers over twice as much liquidity as the second largest stock exchange.
- Price - some of the lowest bid and ask spreads can be found on the NYSE.
- Risk - many traders think the NYSE is less risky than the NASDAQ because it features more established companies.
How can I trade NYSE companies?
Pick a broker
Although you can visit the NYSE's official website to get stock price quotes and, you can't trade on the NYSE without a valid license. You therefore need a broker who is a member of the NYSE to start trading.
When you pick a broker, make sure they're regulated and that you take into account any brokerage fees they charge. These include fixed commissions for stock trading, which can have a negative effect on profits. Other useful features to look for include demo accounts to practice trading on the NYSE and apps for mobile trading.
Some brokers may not provide pre-market and post-market information, but online services such as Yahoo! Finance often provide after-hours quotes and news.
Develop a NYSE trading strategy
A common strategy for trading on the NYSE is to use the NYSE tick index. This involves comparing the number of stocks whose price is increasing compared to those whose price is decreasing, in order to obtain an overall view of the rise or fall of the market. For example, if 2,500 stocks are up and 300 stocks are down, the overall index will be 2,200. Anything above +1000 or below -1000 is considered extreme and is therefore a sort of trading signal. This can be visualised in an NYSE trading volume chart.
Trading hours
NYSE trading hours are: Monday through Friday, 9:30 to 16:00 (New York time). The time difference with the UK is four hours, which means the trading window for London's traders starts at 13:30. It is also possible to make transactions outside of these hours: pre-market transactions are generally open from 8:00, and after-hours transactions start at 16:00 (NY time). However, this schedule is flexible and trading in these times is more volatile. Overnight trading is also possible, with bonds trading from 4:00 to 20:00 (NY time) on the NYSE.
While there is no official lunch break, fewer trades take place during the lunch break in New York City, which means there is less liquidity. Most traders therefore tend to avoid this period.
Also, there are no transactions on weekends, as the NYSE is closed on Saturday and Sunday. The NYSE also observes holidays such as Easter Friday, Thanksgiving (the last Thursday of November), and Memorial Day (which falls in the month of May), and the full schedule for each year can be found on the NYSE's official website. However, the NYSE is open for regular trading hours on New Years eve (31 December) and Easter Monday.
NYSE trading tips
- Traders can find the latest NYSE news on the exchange's official website.
- Stock investing and economics tutorials are available online, through training companies such as Udemy.
- The NYSE reporting centre features regularly published market stats, which can be useful for one's fundamental analysis.
- Online clocks count the remaining NYSE trading hours in different time zones, such as Central Europe, or daylight saving time for US-based traders.
- When developing a trading strategy, make sure you understand your local tax implications.
- It can be difficult to keep an eye on the various NYSE stocks. Set up trading alerts through your trading platform to identify important signals.
- API connections can be used to access real-time, low latency NYSE trading data.
A few final words on NYSE trading
The NYSE is the world's largest stock exchange, allowing traders to both sell and buy shares of publicly listed corporations. Its high liquidity and low spreads attract traders from each corner of the planet.
Some common questions:
How does the NYSE trading floor operate?
Traders trade shares on behalf of clients by buying and selling at an agreed price. This may be an informal arrangement initially, which is communicated to the clearing house, and the transaction is then matched.
What are the NYSE's trading hours?
The NYSE operates from 9:30 to 4:00 UTC time. The NYSE also has extended trading hours, with the start of the pre-market trading session that begins at 8:00 UTC, and the late trading session which begins after the market closes at 4:00. In the UK, these trading hours are 13:30 to 20:00 (London time).
What's the difference between the NASDAQ and the NYSE?
The New York Stock Exchange is an auction market whereas the NASDAQ is a brokerage market. Unlike the NYSE, the NASDAQ doesn't have a physical trading floor and was the first fully electronic exchange. However, trading hours for both the NYSE and the NASDAQ are identical.
How can I start trading Wall Street's stock market?
You simply need to have a basic stock brokerage account. When choosing a broker, make sure they are regulated and see what brokerage fees - if any - they charge.
Does the NYSE ever close (holidays, weekends, etc.)?
The NYSE is closed on New Years Day, Martin Luther King Jr. day (always falls on the 3rd Monday of January), Presidents' day (always falls on the 3rd Monday of February), Good Friday, Memorial Day (always in May), 4th of July (Independence Day), Labour Day, Thanksgiving (always falls on the last Thursday of November), and Christmas (25th of December).
Recommended stock broker
| Brokers | |
|---|---|
| Account type | Stock trading account, margin account (79% of CFD accounts lose money) |
| Management by mandate | No |
| Stock brokerage fees | No commissions for a min. monthly volume of €100,000 EUR, otherwise 0,20%. |
| Demo account | Yes |
| Our opinion | Trading without commissions, but with a very limited choice of 2,000 shares and 16 ETFs. |
| Broker review | XTB |
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Investing carries risks of loss | |