Touro Informal Learning Lecture

1. 2/3/2016 Touro College Graduate School of Business 1

2. NYSE Presentation Roadmap
2/2/2016
Touro College Graduate School of Business
MBA 608 - Fall 2015
2
History Competition Structure
Business
Model
Membership Listings Operations Regulations

3. History
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 The “Buttonwood Agreement” on May 17th 1792.
 24 Stock Brokers and Merchants.
 Bank of New York was the 1st company to be listed.
 Cut rate competition from Govt. bond merchants.
 Closed club.
 0.25% commission rate.

4. Competitor Exchanges
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Touro College Graduate School of Business 4
Then:
London Stock Exchange (1773)
Philadelphia Stock Exchange (1790)
o Stock Exchanges have existed for
more than 200 years.
o Due to the lack of a common
business place, earlier trading's used to
take place in Coffee Houses and
Streets.
o Open outcry and auction system was
was most common.

5. 2/3/2016
Touro College Graduate School of Business 5
Exchange Headquarters Market Cap
($ bil)
Monthly Trade
Volume ($ bil)
New York Stock
Exchange
New York 19,223 1520
NASDAQ New York 6831 1183
London Stock
Exchange Group
London 6187 165
Japan Exchange
Group- Tokyo
Tokyo 4485 402
Shanghai Stock
Exchange
Shanghai 3986 1278
Top 5 Stock Exchanges Today

6. NYSE and NASDAQ Comparison
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LOCATION:
NYSE: Trades occur at a Physical Place
NASDAQ: Trades occur through “Telecommunication
Network” directly between investors and their buyers/sellers.
DEALER Vs. AUCTION MARKET
NYSE: highest bidding price will be matched with the lowest
asking price.
NASDAQ: Participants buy and sell through a Dealer, who is the
Market Maker.
TRAFFIC CONTROL:
NYSE: Specialist.
NASDAQ: Market Maker.

7. NYSE and NASDAQ Comparison
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PERCEPTION AND COST:
NYSE: Companies are perceived to be more well established.
Stocks are considered more stable.
High entry fee (Can be up to $250000)
Companies with high initial capital
NASDAQ: Perceived as High-Tech market.
Stocks are considered more volatile and growth
oriented.
Low entry fee( $50000- $75000)
Companies with less initial capital

8. Structure of NYSE Market
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Touro College Graduate School of Business 8
ICE
NYSE
NYSE
ARCA
OPTIONS
NYSE
MKT
NYSE
ARCA
EQUITIES
NYSE
AMEX
OPTIONS
NYSE
BONDS
Jeffery Sprecher-
Chairman and CEO of
Intercontinental
Exchange
Thomas W. Farley-
President of NYSE
Formerly the
American Stock
Exchange

9. NYSE Business Model
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• Fee from Trading Parties.
• One time Registration Fee.
• Annual Membership Fee.
Transaction Fee
Revenue
• Companies pay One-Time Listing Fee
and Recurring Annual Fee for Listing
and Trading Services.
• More Than 2400 companies listed on
NYSE
Listing Fee Revenue
• NYSE charges fees for providing real-
time data, Historical data, summary
data, reference data.
• Beneficial to Traders , researchers,
etc.
Data Fee Revenue

10. NYSE Business Model
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• Services offered to Mutual Funds and
Asset Management Companies.
• Faster Data and Faster Trade
Execution.
Trading software and
Technology Revenue
• Market Participants, Market Makers,
Brokers need to register and pay
Registration and Membership Fee
• NYSE charges for facilitating trade licenses.
Registration and
Regulatory Fee
Revenue
• Offers corporate governance, risk, and
compliance services to its diversified
customer base.
NYSE Governance
Services Revenue

11. Who Manages NYSE?
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• Matching buyers and sellers.
• Ensures fair, competitive, orderly and
efficient market.
• Avoids large or unreasonable Price
fluctuations
The Specialists:
• Members of NYSE who trade exclusively for
their own account.
• Also act as Floor Brokers.
The Floor Trader
• Stock order entering System
• A common message switch between
Broker firms and Specialist’s trading-floor
Workstation.
The SuperDOT
System

12. How To Become a Member
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Connect
Fill out
Market-
Specific
Forms
Qualify

13. How Do Traders Get Licensed?
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 Buy A Seat:
o The Price of the seats starts at $3.25 Million.
o Fluctuates according to demand and supply.
 Become a Member:
o The NYSE has conferred the right to trade directly on the floor to
registered members of the exchange.
o Individual investors cannot be members. Only Qualifying firms.
o Detailed Membership Application
o Admitted members can then apply for a trading license.
o Must be renewed annually at a fixed trading price.
 Get Hired:
o Most floor traders are hired by seat owners or other licensed members.
o Must be Highly trained and educated.
o Prior trading and market making experience must.

14. NYSE Listing Qualifications
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Application
Agreement
Letter from
Security
Underwriter
Shareholders
At least 400
shareholders
owning more
than 100 shares
of stock
1.1 million shares of
publicly traded stock
Stock Price must be at
least $4 a share.
Profits
A company
must be
profitable.

15. NYSE Listing Qualifications
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NYSE Discretion
Can apply more
stringent criteria
even if company
meets basic
requirements.
A listed company
shares can start
trading in 4-6 weeks
Global
considerations
A company must have
2.5 million shares
outstanding and 5000
public shareholders
Brokerage firms to attest
the depth of market and
liquidity of non- American
Companies.

16. NYSE Operations
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 Actual trading floor at 11 Wall Street in New York.
 Auction market where brokers and specialists buy and sell securities
for people by matching the highest bidding price with the lowest
selling price
 Stocks, bonds, warrants, options, and rights are traded at 22
horseshoe-shaped installations, called trading posts, on the floor of
the exchange.
 NYSE works in continual auction mode, where traders working on
behalf of investors execute stock transactions
 The NYSE's opening and closing bells mark the beginning and the end
of each trading day. The 'opening bell' is rung at 9:30 AM ET to mark
the start of the day's trading session. At 4 PM ET the 'closing bell' is
rung and trading for the day stops.

17. What Happens When a trade Takes
Place?
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Orders come in
through brokerage
firms(Members)
Passes on to Floor
Brokers
Specialist matches
buyers and sellers.
Prices are fixed
by Auction
Method
Goes to a specific
spot on floor where
stock trades
Details are sent back to the
brokerage firm, who then
notifies the investor who placed
the order

18. 2/3/2016 Touro College Graduate School of Business 18
NYSE Factoids
o Worlds Largest stock exchange by Market
Capitalization of its listed companies at US$19.69
trillion (May 2015).
o The average daily trading value was
approximately US$169 billion in 2013.
o Berkshire Hathaway's A Class shares, the highest
priced shares on the NYSE, hit $200,000 a share for
the first time on August 14, 2014.

19. Regulation
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NYSE
Self-Regulatory
organization
Regulation
Market
Surveillance
Division
Regulation
Enforcement
Division
Sets forth its own rules,
forms and ethical
business Practices
Detects any
unlawful and
unethical behavior
of broker dealers
and listed
companies
Investigates the
abuse allegations.
Takes disciplinary
action or reports
to SEC.
SEC
oversees the rules and
operations of the NYSE
Create Financial
transparency for public
companies.
Division of Trading
and Markets
Supervision on all US Stock
Exchanges and NYSE
Market Surveillance to identify
illegal activities.

20. SEC Trading Suspensions
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• Authorized under federal law to suspend trading in any
stock for a period of up to 10 business days.
• Protection of Investors and Public Interest.
Factors that
can lead to
SEC Trade
Suspension
failure to
keep up the
required
filing of
periodic
reports
Inaccuracy
of publicly
available
information
Market
manipulation

21. Major Changes Over Time
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• 1817: Became a formal Organization among brokers as “New York Stock &
Exchange board” renting rooms at 40 Wall street.
• 1863: Changed its name to New York Stock Exchange
• 1867:Invention of Stock Ticker.
• 1878: First telephone installed on the NYSE floor.
• 1943: Women started working in NYSE for the first time.
• 2006: NYSE merges with electronic trading exchange Archipelago holdings,
creating the NYSE Group, a publicly traded company.
• 2007: NYSE Group merges with European stock exchange operator Euronext,
forming NYSE Euronext.

22. Thanks
2/2/2016
Touro College Graduate School of Business
MBA 608 - Fall 2015
22
Questions?
steven.murphy8@touro.edu