New York Stock Exchange

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New York Stock Exchange (NYSE)
Founded	1792
Headquarters	New York, NY
Key People	Lynn Martin, President
Products	listed securities

The New York Stock Exchange (NYSE) is one of the world's largest and oldest securities exchanges, with a history dating back over 230 years to its founding in 1792. It has played a central role in the development of global financial markets. It remains a key platform for trading equities, bonds, and other securities, often referred to as the "Big Board."

It is owned by the Intercontinental Exchange Group, which acquired it in November 2013 along with NYSE's complementary stock and options markets, NYSE Arca and NYSE Arca Options. NYSE lists approximately 2,385 companies with a collective market cap of $31.7 trillion.

The NYSE uses a Designated Market Maker (DMM) model in which DMMs have obligations to maintain fair and orderly markets for their assigned securities. They operate both manually and electronically.

History

The New York Stock Exchange (NYSE) traces its origins to the Buttonwood Agreement, signed on May 17, 1792, by 24 stockbrokers and merchants. This agreement, signed under a buttonwood tree on Wall Street, established a structured market for buying and selling securities and set rules for trading, including fixed commissions.

In the exchange's early years, stock trading continued informally in nearby coffeehouses. By 1817, the stock market had grown active enough to encourage brokers to create a more formal organization. On March 8, 1817, a constitution was adopted, creating the New York Stock & Exchange Board ("NYS&EB"), the direct predecessor of today's NYSE.

The new stock exchange rented a room at 40 Wall Street where brokers gathered twice daily to trade a list of 30 stocks and bonds. Trading was conducted through a call system, where the president called out the name of each security in turn, and brokers shouted bids and offers from assigned chairs. This practice gave rise to the term "seat," which has since signified membership on the NYSE.

In 1827, the exchange moved to the Merchants' Exchange building, where it remained until the building was destroyed by fire in 1835. After using temporary locations, the exchange moved to the Second Merchants' Exchange in 1842.

The period between the exchange's founding and the Civil War saw significant growth and development:

1. In 1830, the first shares of a railroad company were traded on the NYSE.
2. The 1830s saw increased speculation in railroad stocks, stimulating trading activity.
3. After the Panic of 1837, the exchange began requiring companies to disclose financial information to the public as a condition for offering stock.
4. In 1863, the organization officially changed its name to the New York Stock Exchange.

By the start of the Civil War in 1861, the NYSE had established itself as a key institution in American finance. The war itself would greatly stimulate speculative securities trading in New York, further cementing the NYSE's importance in the nation's economy.

At the outbreak of the Civil War in 1861, the New York Stock Exchange took a decisive stance by suspending trading in securities of the seceding Southern states. This action was a significant economic blow to the Confederacy and demonstrated the exchange's alignment with the Union cause. The suspension affected stocks and bonds of Southern banks, railroads, and other companies, effectively cutting off a crucial source of capital for the Confederate states. This move by the NYSE not only had immediate financial implications but also symbolized the deepening economic divide between the North and South during the conflict.

Civil War Era

During the Civil War (1861-1865), the NYSE experienced a trading boom in gold, securities, and other assets. However, the exchange, then known as the New York Stock and Exchange Board (NYSEB), was unprepared to handle the increased volume. Its restrictive membership policies and limited trading sessions (only two calls per day) proved inadequate for the surge in market activity.

In response to these limitations, a group of brokers formed the Open Board of Stock Brokers in 1864. This new organization introduced several innovations, including public observation of trading sessions and the establishment of a governing committee.

Post-War Developments

Name Change and Relocation

In 1863, the exchange shortened its name to the New York Stock Exchange (NYSE). Two years later, in 1865, the NYSE moved to a new location at 10-12 Broad Street.

Technological Advancements

The latter half of the 19th century saw several technological innovations that revolutionized trading:

1. In 1867, the first stock ticker was introduced, enabling rapid transmission of market information across the United States.
2. In 1878, telephones were installed at the NYSE, further enhancing market efficiency.
3. In 1883, the NYSE introduced electric lighting.

Trading System Changes

By the end of the Civil War, more than 300 different stocks and bonds were traded at the NYSE. This growth in trading volume led to a significant change in the trading system. The exchange switched from the old method of trading to a new system of simultaneous trading in all stocks in a continuous market. Stocks were assigned to specific locations called trading posts, and brokers moved around the trading floor to conduct transactions.

Late 19th Century

Membership and Seat Ownership

In 1868, membership on the exchange became a valuable property. Members could only join by purchasing existing seats, which were limited to a total of 1,366. In 1871, a seat sold for $2,780, and in December 2005 a membership sold for a record $4 million.

Creation of the Dow Jones Industrial Average

In 1896, Charles Dow and Edward Jones created the Dow Jones Industrial Average (DJIA), which became a key indicator of the overall stock market performance.

Expansion of Trading Volume

Between 1896 and 1901, the volume of stocks traded increased six-fold, necessitating a larger space to conduct business in the expanding marketplace.

By the end of the 19th century, the NYSE had established itself as a key institution in American finance, setting the stage for its dominant role in the 20th century.

Black Friday 1969

On September 24, 1869, known as Black Friday, the U.S. gold market experienced a dramatic crash that sent shockwaves through the financial system. This crisis was precipitated by a scheme orchestrated by speculators Jay Gould and James Fisk, who attempted to corner the gold market. Their plan involved driving up the price of gold by buying large quantities while simultaneously trying to influence government policy to restrict gold sales. When President Ulysses S. Grant became aware of the manipulation, he ordered the Treasury to sell gold, causing the price to plummet from $162 to $133 per ounce in a single day. The resulting panic led to a stock market crash, with prices falling more than 20% in the following week. This event highlighted the vulnerability of the financial markets to manipulation and speculation.

Panic of 1873

In 1873, the New York Stock Exchange faced another significant crisis when it was forced to close for ten days due to a severe financial panic. This panic was triggered by the bankruptcy of Jay Cooke & Company, a prominent Philadelphia banking firm that had heavily invested in railroad bonds. The failure of this major financial institution on September 18, 1873, sparked a chain reaction of bank failures and a sharp economic downturn that became known as the Panic of 1873. The New York Stock Exchange's unprecedented ten-day closure was a desperate measure to prevent further financial chaos and stem the tide of panic selling. This event marked the beginning of a prolonged economic depression in the United States and Europe, known as the Long Depression, which lasted until 1879.

1900 to 1929

New Building

In 1901, the NYSE began construction on a new building to accommodate its expanding operations. The cornerstone was laid on September 9, 1901, and the building was completed in April 1903.

George Browne Post (1837-1913), an influential architect, gained prominence for his work in skeleton construction and skyscraper design. He designed the New York Stock Exchange (NYSE) Building, a neoclassical replacement for its Second Empire predecessor. This style, chosen for its symbolic representation of security and strength, features a monumental facade, blending classical elements like a pediment and colossal Corinthian columns, similar to Post's earlier works. The design addressed complex site challenges, including irregular terrain and lighting needs. A key feature is the figural sculpture, "Integrity Protecting the Works of Man," by John Quincy Adams Ward, symbolizing American prosperity.

Technological Advancements

The NYSE continued to embrace technological innovations during this period:

• In 1903, the exchange moved into its new building, which was equipped with modern amenities including electric lighting.

• In 1928, the NYSE introduced a central quotation system, providing up-to-date stock prices to member firms.

Panic of 1907

The Panic of 1907, also known as the Knickerbocker Crisis, was a severe financial crisis that shook the United States banking system. It began in mid-October when the New York Stock Exchange fell almost 50% from its peak the previous year. The panic was triggered by a failed attempt to corner the market on stock of the United Copper Company, which led to runs on banks associated with the scheme. The crisis reached its peak with the collapse of the Knickerbocker Trust Company, New York City's third-largest trust, spreading fear throughout the financial system. As regional banks withdrew reserves from New York City banks, the panic extended across the nation, causing widespread bank runs and business bankruptcies. The severity of the crisis was exacerbated by the lack of a central bank, forcing private financiers, most notably J.P. Morgan, Sr., to intervene and provide liquidity to stabilize the markets. The Panic of 1907 ultimately led to significant reforms in the U.S. financial system, including the creation of the Federal Reserve System in 1913.

Outbreak of World War I

At the outbreak of World War I in 1914, the New York Stock Exchange (NYSE) experienced unprecedented disruption. Following the lead of other major securities exchanges around the world, the NYSE closed its doors on July 31, 1914, marking the beginning of the longest closure in the exchange's history. This closure lasted for 4 1/2 months, a period during which global financial markets were in turmoil. The decision to close was made to prevent panic selling and the potential collapse of stock prices, as European investors sought to liquidate their American securities to finance the war effort. The NYSE partially reopened on November 28, 1914, for bond trading to support the war effort, and fully resumed stock trading in mid-December. This extended closure marked a significant moment in the NYSE's history and highlighted the interconnectedness of global financial markets during times of international crisis.

Stock Market Crash of 1929 and the Great Depression

The New York Stock Exchange (NYSE) experienced unprecedented growth during the 1920s, a period known as the "Roaring Twenties." The Dow Jones Industrial Average increased six-fold from 63 in August 1921 to 381 in September 1929.

The Crash

The stock market crash of 1929 began on October 24, known as "Black Thursday," when the market opened 11% lower than the previous day's close. The following Monday, now known as "Black Monday," the Dow Jones Industrial Average closed down 13%. On "Black Tuesday," October 29, the Dow fell another 12%.

On Black Tuesday, more than 16 million shares were traded on the NYSE, a record that stood for nearly 40 years. This massive volume overwhelmed the ticker tape system, which ran hours behind the market, adding to investor panic.

Impact on Volume and the Great Depression

The crash marked the beginning of a prolonged period of declining trading volumes and stock prices. From its peak in September 1929 to its lowest point in July 1932, the Dow Jones Industrial Average lost 89% of its value.

1930 to 1970

In 1939, NYSE hired its firm full-time salaried president, William McChesney Martin, Jr.

The war year of 1943 saw women working on the NYSE's trading floor for the first time, ending the tradition of men only.

On November 22, 1963 the exchange closed early to prevent panic selling after the assassination of U.S. President John F. Kennedy.

In 1970, on February 12, Joseph L. Searles, III became the first African-American member of the New York Stock Exchange.

1970 to 2000

In 1971, the NYSE incorporated itself as a not-for-profit company.

In 1987, the stock market crashed 508 points, the largest one-day drop in the exchange's history. Volume was an unprecedented 604 million shares traded. This is referred to as the Market crash of 1987 or Black Monday.

In 1997, the Dow Jones Industrial Average plummeted 554 points in what was referred to as a flash crash.

2001 to the Present

On September 11, 2001, terrorist attacks destroyed the World Trade Center. The NYSE closed for four days -- its longest closure since 1933 -- and reopened on September 17, setting a volume record of 2.37 billion shares.

It merged with Euronext N.V. in 2007 to create NYSE Euronext. NYSE Euronext was bought by its former rival the InterContinentalExchange (ICE) in 2013 and in 2014 Euronext was spun off through an IPO.

In early 2017, it was announced that the trading floor of the NYSE MKT exchange, formerly known as the American Stock Exchange (AMEX), would shut down in the second quarter of 2017. When the closure became effective, all trading on the NYSE MKT exchange, which lists and trades around 250 small-cap companies, would be automated, including opening, re-opening, and closing auctions. The open trading floor was replaced by a new trading technology platform known as NYSE Pillar that connected all of its equities and options markets, including the NYSE, NYSE MKT, NYSE Arca Equities, NYSE Arca Options, and NYSE Amex Options. NYSE Group completed the rollout of NYSE Pillar matching engines on NYSE Arca in May of 2016.

The exchange began upgrading to the new Pillar technology on August 5, 2019, with plans to move all stocks listed on the Big Board in phases from the old system to the new one over a three-week period. Previous Pillar rollouts on other, lower-profile NYSE exchanges were marred by glitches and delays. In 2023, NYSE successfully migrated its final exchange, NYSE American Options, to NYSE Pillar, following the previous year’s successful migration of NYSE Arca Options. This completed the multi-year migration of all of NYSE Group's equities and options exchanges to Pillar, according to NYSE Chief Product Officer Jon Herrick.

On April 9, 2018, the NYSE ended the decades-old restriction that prevented stocks listed on rival exchanges from being bought and sold on the NYSE. The change was part of an upgrade to the exchange's systems. It expanded the number of securities that can potentially be traded on the exchange to the approximately 8,600 stocks and ETFs listed in the U.S. Until that date, the NYSE was the only one of the 12 U.S. stock exchanges in operation that limited trading to its own listed securities.

NYSE Organization

• The exchange was first organized on May 17, 1792.
• It was incorporated on Feb. 18, 1971 as the New York Stock Exchange, Inc., a not-for-profit corporation.
• It was established as a for-profit corporation, the NYSE Group, on March 7, 2006.
• It announced an agreement to combine NYSE and Euronext to "redefine the marketplace for trading cash and derivatives securities, producing significant benefits for shareholders, issuers and users," on June 1, 2006.
• The creation of NYSE Euronext occurred on Apr. 4, 2007.
• The NYSE was purchased in November 2013 by the Intercontinental Exchange.

NYSE Firsts and Records

• First member firm to go public: Donaldson, Lufkin & Jenrette, 1970
• First member firm to be listed on the NYSE: Merrill Lynch, 1971
• Highest price paid for a membership: $4 million on December 2005
• Lowest price paid for a membership: $2,750 in 1871
• First listed company: Bank of New York, traded under the Buttonwood Tree, 1792
• Longest listed company: Con Edison, listed in 1824 as the New York Gas Light Company
• Oldest listed company: Sotheby's, founded 1744; listed 1990

NYSE Volume Market Highlights

Daily share volume (first day over):

• 1 million - 1886
• 5 million - 1928
• 10 million - 1929 (It took one year to double share volume, and another 49 to quintuple it.)
• 50 million - 1978
• 100 million - 1982
• 500 million - 1987 (It took only five years to quintuple share volume, culminating in the stock market crash of Oct. 19, 1987 - the crash was actually fairly short lived compared to the "furor" it caused.)
• 1 billion - 1997 (It took another 10 years to double share volume.)
• 2 billion - 2001
• 3 billion - 2005
• 4 billion - 2007
• 5 billion - 2007

NYSE Highs And Lows

• 5,799,792,281 shares on Aug. 16, 2007; lowest volume day: 31 shares on March 16, 1830
• Dow Jones Industrial Average biggest single-day jump: 499.19 points, March 16, 2000
• Dow Jones Industrial Average biggest single-day drop: 684.81 points, Sept. 17, 2001

Products and Services

On May 18, 2015, the NYSE launched a bitcoin index, formally called the NYSE Bitcoin Index (NYXBT). It is the first such index produced by a major exchange. Bloomberg had been providing bitcoin prices quotes since 2014, and various bitcoin exchanges provide their own quotes, as do news sites such as CoinDesk. The index will be made available through NYSE's Global Index Feed and will be free on its website for a limited time. It is intended to serve as a definitive benchmark for valuing the currency.

The exchange received approval from the SEC in May 2017 to introduce a "speed bump" on one of its trading venues. The move was seen as a direct challenge to IEX, its smaller rival, which pioneered the speed bump. NYSE's bump allows a delay of 350 micrseconds on NYSE MKT, which was renamed "NYSE American."

ESG at the NYSE

Information about NYSE's corporate commitment to sustainability can be found on the ICE website here.

Key People

• Lynn Martin, President
• Sharon Bowen, Chair