New York Stock Exchange (NYSE): Definition, How It Works, History.Complete Guide[2024]

What Is the New York Stock Exchange (NYSE)?

The New York Stock Exchange (NYSE) is a stock exchange located in New York City that is the largest equities-based exchange in the world, based on the total market capitalization of its listed securities.

Formerly run as a private organization, the NYSE became a public entity on March 8, 2006, following the acquisition of electronic trading exchange Archipelago.1 In 2007, a merger with Euronext—the largest stock exchange in Europe—led to the creation of NYSE Euronext, which was later acquired by Intercontinental Exchange, Inc. (ICE), the current parent of the New York Stock Exchange.2

KEY TAKEAWAYS

• The New York Stock Exchange (NYSE), which dates back to 1792, is the largest stock exchange in the world based on the total market capitalization of its listed securities.
• It was the first formalized stock exchange established in the United States.
• Many of the oldest publicly traded U.S. companies are listed on the “Big Board,” the nickname for the NYSE.
• The Intercontinental Exchange (ICE) now owns the NYSE, having purchased the exchange in 2013.

Understanding the New York Stock Exchange (NYSE)

Located on Wall Street in New York City, the New York Stock Exchange—also known as the “Big Board“— consists of one trading floor for equities and another for the NYSE American options exchange. The main building located at 18 Broad St. and the one at 11 Wall St. were both designated historical landmarks in 1978.3

The NYSE relied for many years on floor trading only, using the open outcry system. Many NYSE trades have transitioned to electronic systems relying mainly on designated market makers to conduct both the physical and automated auctions. Quotes offered by DMMs are on par with what floor traders and other market participants offer.

Currently, the NYSE is open for trading Monday through Friday from 9:30 a.m. to 4:00 p.m. ET. The stock exchange is closed on certain U.S. holidays. When these fall on a Saturday, the NYSE is sometimes closed the preceding Friday. When holidays fall on a Sunday, the NYSE may be closed the following Monday.

The NYSE is the world’s largest stock exchange by total market capitalization of listed companies, which is estimated to be $24.6 trillion as of Mid-2022.

The NYSE’s Opening and Closing Bells

The opening and closing bells of the exchange mark the beginning and end of the trading day. The opening bell is rung at 9:30 a.m. ET, and the closing bell is rung at 4:00 p.m. ET, closing trading for the day. But trading days did not always begin and end with a bell—the original signal was actually a gavel. During the late 1800s, the NYSE changed the gavel to a gong. The bell became the official signal for the exchange in 1903 when the NYSE moved to 18 Broad St.6

Prior to 1995, the exchange’s floor managers rang the bells. But the NYSE began inviting company executives to ring the opening and closing bells on a regular basis, which later became a daily event. The executives are from companies listed on the exchange, who sometimes coordinate their appearances with marketing events, such as the launch of a new product or innovation, or a merger or acquisition.

Sometimes, other public figures, such as athletes and celebrities, ring the bell. Some of the more notable figures to ring it include singer/actor Liza Minnelli, Olympic medalist Michael Phelps, and rapper Snoop Dogg. In July 2013, United Nations Secretary Ban Ki-moon rang the closing bell to mark the NYSE joining the U.N. Sustainable Stock Exchanges Initiative.7

United Nations News. “Ban rings Wall Street closing bell, welcomes NY Stock Exchange to UN initiative.”

FAST FACT

The New York Stock Exchange passed the milestone of one million shares traded in a single day in 1888. By 2022, more than five billion shares were changing hands on the NYSE during a normal business day.8

History of the NYSE

The New York Stock Exchange dates back to May 17, 1792. On that day, 24 stockbrokers from New York City signed the Buttonwood Agreement at 68 Wall St. The New York Stock Exchange kicked off with five securities, which included three government bonds and two bank stocks.9

Thanks to the NYSE’s head start as the major U.S. stock exchange, many of the oldest publicly traded companies are on the exchange. Consolidated Edison (ED) is the longest-listed NYSE stock, joining in 1824 as the New York Gas Light Company.10 Along with American stocks, foreign-based corporations can also list their shares on the NYSE if they adhere to certain listing standards.11

A series of mergers has given the New York Stock Exchange its massive size and global presence. The company started as NYSE before merging with the Euronext and adding the American Stock Exchange.12 NYSE Euronext was purchased in an $11 billion deal by the Intercontinental Exchange (ICE) in 2013.13 The following year, Euronext emerged from ICE via an initial public offering (IPO), but ICE retained ownership of the NYSE.14

A Few Notable Dates in the NYSE’s History

• Oct. 24, 1929: The most devastating stock market crash in the history of the U.S. began on Black Thursday and continued into a sell-off panic on Black Tuesday, Oct. 29. It followed the crash of the London Stock Exchange, which took place in September and signaled the onset of the Great Depression, which affected all of the industrialized countries in the West.15 
• Oct. 1, 1934: The NYSE registered as a national securities exchange with the SEC.
• Oct. 19, 1987: The Dow Jones Industrial Average (DJIA) dropped 508 points or a loss of 22.6% in a single day.16
• Sept. 11, 2001: Trading was shut down for four days at the NYSE following the 9/11 attacks and resumed on Sept. 17. About $1.4 trillion was lost in the five days of trading following the reopening—the biggest losses in NYSE history.
• October 2008: NYSE Euronext completed the acquisition of the American Stock Exchange for $260 million in stock.12
• May 6, 2010: The DJIA suffered its largest intraday drop since the crash of Oct. 19, 1987. It dropped 998 points in what is known as the 2010 Flash Crash.17
• Dec. 20, 2012: ICE proposed to buy NYSE Euronext in a stock swap worth $8 billion.2
• May 1, 2014: The NYSE was fined $4.5 million by the Securities and Exchange Commission in order to settle charges of market rule violations.18
• May 25, 2018: Stacey Cunningham became the first female president of the NYSE.19
• March 16, 2020: The onset of COVID-19 pandemic fears led to the DJIA suffering its largest daily point drop in history as it fell 2,997.10 points from the previous close. Percentage-wise, it was the third worst day ever.20
• March 23, 2020: The NYSE temporarily closed floor trading due to the COVID-19 pandemic, opting to continue its operations electronically.21
• March 24, 2020: The DJIA recorded its largest one-day point gain on expectation of a stimulus relief bill. Percentage-wise, it was the fifth best day ever. 22

Who Owns the New York Stock Exchange?

The New York Stock Exchange was acquired by the Intercontinental Exchange (ICE) group in 2013. Interestingly, ICE itself is also listed on the NYSE under the ticker symbol “ICE”.

The ownership structure of the NYSE has changed throughout history. In the past, it was a member-owned organization, but in 2006, it transformed into a publicly traded company.

How the New York Stock Exchange (NYSE) works

The New York Stock Exchange has two primary functions:

• It provides a central marketplace for investors to buy and sell stock.
• It enables companies to list their shares and raise capital from interested investors.

The New York Stock Exchange provides a location where its members can trade stock in listed companies. Historically, traders called out their buy or sell orders to each other on the exchange trading floor. When a buyer and a seller agreed on a price, a trade would occur. Transactions would then be reported on the exchange, providing transparency and enabling efficient market operations.

Now, with electronic trading, NYSE-run computers are largely responsible for matching up buyers and sellers in real time. However, the system still operates in a similar fashion, with investors placing orders stating at what price they’d be willing to buy or sell.

Most investors aren’t members of the New York Stock Exchange, but many of the brokerage companies that allow them to invest in stocks are. When a brokerage customer places a trade for a NYSE-listed stock, the brokerage company relays the order to its NYSE trading operations, which then handle executing the trade and following the customer’s instructions.

The New York Stock Exchange also acts as a gateway for companies that want to raise money by selling stock. Companies that want to list their stock on the New York Stock Exchange have to meet both the U.S. Securities and Exchange Commission’s disclosure requirements for publicly traded companies and the specific listing requirements the NYSE imposes. Young companies often seek to have their initial public offerings on the NYSE in order to gain the prestige of having their shares traded alongside those of many of the top companies in the world.

Where Is the Oldest Stock Exchange in the World?

The Amsterdam Stock Exchange (AEX) in the Netherlands is the oldest stock exchange, established in 1602 by the Dutch East India Company. Today the Amsterdam exchange is owned by Euronext.

What Is the Largest Stock Exchange in the World?

The New York Stock Exchange (NYSE) remains the largest stock exchange in the world in terms of the market capitalization of the companies listed on it. The NASDAQ ranked second, followed by the Shanghai Stock Exchange, and the Euronext.

What is the NYSE Composite Index?

The New York Stock Exchange (NYSE) Composite Index is kind of like a measuring stick that tracks the performance of all of the stocks trading on the NYSE. The index measures all domestic common stocks, which is a type of stock investors can buy that gives them ownership and voting rights within the company (and may or may not come with dividends). The index also measures American depository receipts (shares in a foreign company), real estate investment trusts (or REITs, which are companies that manage properties), and tracking stocks (stocks that companies issue to track a specific internal division).

The NYSE Composite Index includes about 2,000 stocks in more than 40 different industries. While some indexes are more narrowly focused in certain industries, the NYSE includes companies from many parts of the economy.

The NYSE Composite Index is market capitalization-weighted — The performance of certain companies within the Index gets more weight if those companies have more value in outstanding stock shares. For example, if one company has $100,000 worth of outstanding shares and another has $250,000 worth, the company with more share value (the higher capitalization) will generally have a bigger impact on the performance of the Index as a whole.

The NYSE Composite Index also offers a way for investors to indirectly invest in all or specific parts of the exchange. Investors can do so by investing in an index fund, a mutual fund, or an exchange-traded fund, which are investment funds that seek to track the performance of a particular stock index.

What are NYSE trading hours?

The New York Stock Exchange is generally open on weekdays and is closed on Saturday and Sunday. Trading begins each day at 9:30 a.m. ET and ends at 4 p.m. ET.

As you can see in the table below, the NYSE observes certain U.S. federal holidays each year. In addition to being closed all day on these days, the NYSE has half-day sessions on two days each year: the Friday after Thanksgiving and Christmas Eve (if it falls on a weekday and if the regular Christmas holiday is observed on Dec. 25). During those half-day sessions, the market opens at 9:30 a.m. ET but closes early at 1 p.m. ET.

What is the difference between the NYSE and NASDAQ?

The New York Stock Exchange (NYSE) might be the world’s largest stock exchange, but it’s far from the only one. The second-largest exchange after the NYSE is the Nasdaq. While both are stock exchanges (a place where investors can buy and sell stocks), it’s worth noting their differences.

First, the Nasdaq is newer than the NYSE. While the NYSE dates back hundreds of years, the Nasdaq has only been around a few decades. When it got its start in 1971, the Nasdaq became the first fully electronic stock market. Unlike the NYSE, the Nasdaq doesn’t have a trading floor where brokers buy and sell securities.

In addition to the difference in age and location, the two differ significantly when it comes to how they work. The NYSE is an auction market, which means investors can buy and sell securities amongst themselves or through a broker. The Nasdaq, on the other hand, has dealers that act as a third party. Rather than selling stock to another investor, someone would sell to a dealer. The dealer then turns around and sells the stock to another investor. The dealers are financial professionals, often employed by brokerage firms.

Finally, the two exchanges differ in terms of the types of companies they host. The NYSE tends to be the home to companies that, like the exchange itself, have been around for a long time and are generally seen as relatively stable. The Nasdaq tends to attract more volatile stocks, many of which are growing rapidly. Many new tech companies have turned to the Nasdaq rather than the NYSE to do business.

What is the market cap of the NYSE and NASDAQ?

The market capitalization (aka market cap) of a company is the total value of the shares currently held by shareholders. The market cap of a stock exchange is the dollar value of all outstanding shares on the exchange.

The New York Stock Exchange (NYSE) is the stock exchange with the greatest market cap in the world. The NYSE market capitalization of $24.2T is 30% higher than that of the Nasdaq, which has a market cap of about $18.6T, as of August 2022.

The NYSE is the larger of the two exchanges in terms of market capitalization, but the Nasdaq is catching up. In 2018, the NYSE hosted about $30B worth of initial public offerings (or IPOs, which is when a company issues publicly for the first time).

In 2021, the Nasdaq hosted a total of $191.38B worth of IPOs, while the NYSE hosted only $109.25B worth of IPOs. Plus, the Nasdaq also saw faster growth than the NYSE between 2015 and 2019, growing 6% per year, compared to the NYSE’s 3% per year. Its spur growth in IPOs has helped the Nasdaq shrink the gap between its market capitalization and that of the NYSE, which used to be about double of that of Nasdaq’s back in 2018.

The Bottom Line

The New York Stock Exchange (NYSE) is the oldest and most influential securities exchange in the United States, and is the largest stock exchange in the world by total listed company market cap. With humble beginnings under a buttonwood tree in Manhattan, the NYSE is now a landmark that epitomizes Wall Street. Today, the NYSE lists the most important publicly-traded American companies and is still seen as the premier venue for stock trading.

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