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This site does not include all companies or products available within the market. However, the Roaring Twenties came to an abrupt end in October , when stock markets crashed and fortunes were wiped out overnight. The crash was followed by the Great Depression of the 's, a period of severe economic crisis throughout much of the world. Since the end of World War II, small investors have begun investing again in stocks, and stock markets have been relatively stable. A sharp fall in prices in led to another stock market crash.
Initially, this frightened many people away from stock investments. But within a few months the market recovered and investor confidence returned. These exchanges act as marketplaces for the buying and selling of stocks.
In colonial America there were no stock exchanges. People who wanted to buy and sell securities met in auction rooms, coffeehouses, or even on street corners. Stock trading was unorganized, and people were reluctant to invest because they could not be sure they would be able to resell their securities. In , a small group of merchants made a pact that became known as the Buttonwood Tree Agreement.
These men decided to meet daily to buy and sell stocks and bonds. Today there are more than 1, members of the New York Stock Exchange. Each of these members "owns a seat" on the exchange. This term comes from early years, when members had to stay seated while the exchange's president called out the list of securities to be traded. Despite the change and growth of the New York Stock Exchange over the years, its basic purpose has remained much the same—to allow companies to raise money and to allow the public to invest and make their money grow.
The New York Stock Exchange operates under a constitution and a set of rules that govern the conduct of members and the handling of transactions. The members elect a board of directors that decides policies and handles any discipline problems. The exchange is controlled by its own rules and by federal regulations set up by the Securities and Exchange Commission, which was established by the U.
Until it was easy for a company to have its securities listed on the exchange. A broker simply had to propose that a certain security be traded and get the consent of a majority of the other members. As business expanded, however, greater regulation became necessary, and the exchange established its first requirement for listing a company—that it be notified of all stock issued and valid for trading.
In the years that followed, the exchange added more requirements, including company reports on earnings and other financial information. This helps potential investors make investment decisions more wisely. To qualify for a listing on the exchange today, a company must be in operation and have substantial assets and earning power. The exchange considers a company's permanence and position in its industry as well.
All common stocks listed on the exchange must have voting power, and companies must issue important news in such a way that all investors have equal and prompt access to it. In addition to the New York Stock Exchange, which is the largest exchange in the United States, investors can also buy and sell stocks on the American Stock Exchange and several regional exchanges.
The New York Stock Exchange itself neither buys, sells, nor sets prices of any securities that are listed. It simply provides the marketplace in which stocks and bonds are bought and sold. Placing an Order. The investor calls a stockbroker—a registered representative of a stock exchange member—whose job is to provide investors with information and carry out investors' orders to buy and sell. The investor asks the broker the price of XYZ stock.
The broker checks the price on a computer terminal and learns that XYZ Corporation is quoted at 25 to a quarter. The investor tells the broker to buy "at the market," which means to buy shares at the best available price at the time the order reaches the stock exchange.
If the investor sets an exact price he or she is willing to pay, the order is called a "limit order," and no sale can take place unless another stockholder wants to buy or sell at that price.
By telephone or computer, the broker in Iowa sends the investor's order through a trading desk at his or her firm's main office to a clerk on the floor of the stock exchange in New York.
The clerk alerts the firm's floor broker by putting the broker's call number on two boards, one on each side of the trading floor. These boards are visible no matter where the floor broker is standing. The broker sees the call number and immediately goes to take the order. Trading Stock. Small orders, such as those under 1, shares, often are executed automatically by computer at the best possible price at the time.
Larger orders, however, are traded on the floor of the exchange, with a floor broker bargaining on the investor's behalf. After receiving the order, the floor broker hurries to the place, called the trading post, where XYZ Corporation shares are traded. Other brokers with orders to buy or sell stocks will also be gathered there. Each trading post handles about 85 different stocks. This is where the exchange's member-brokers make transactions for investors. At the trading post, the floor broker looks up at a video monitor above the post to see the current buy and sell prices for XYZ stock.
Or he asks loudly, "How's XYZ? It is the broker's job, however, to get the best possible price for an investor. Another broker who has an order to sell 2, shares of XYZ at 25[frac18] accepts the bid and says, "Sold.
Completing a Trade. Each broker completes the agreement by writing the price and the name of the other broker's firm on an order slip. The brokers report the transaction to their telephone clerks, so that the investors can be notified. Meanwhile, a record of the transaction is entered into the exchange's huge computer.
This allows the transaction to be displayed, with all others, on thousands of computer terminals throughout the United States and around the world. Specialists are stock exchange members who help maintain an orderly market in the stocks for which they are registered. They do this by buying and selling for their own accounts whenever there is a temporary gap between supply and demand.
In this way, they smooth the way for investors, allowing them to sell when there are few buyers or to buy when there are few sellers. Specialists also act as brokers. A floor broker may choose to leave an order with a specialist, to be carried out when the stock reaches a certain price.
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