Seats On The New York Stock Exchange

What Is The Seat On The New York Stock Exchange?

A seat on the New York Stock Exchange represent both an equity interest in the Exchange as well as the right to access the trading facilities of the market.

A Membership on the NYSE is traditionally referred to as a 'seat' because in the early year of its existence, Members sat in assigned chairs in the hall where the Exchange’s daily roll call of stocks was conducted.

After a post-Civil War boom in stock trading, the Exchange adopted a system of continuous trading, replacing calls of stocks at set times with simultaneous trading of all listed stocks on a large open trading floor.

The term 'seat' lost its literal meaning with the advent of continuous trading in 1871. Trading was then conducted at trading posts on a large open floor. The seats that the brokers had occupied were gone. Owning or leasing a seat on the Exchange enabled qualified and licensed professionals to buy and sell securities on the floor.

In 1868 the Exchange established a fixed number of Memberships and revised its rules to allow Members to sell their seats. After selling for as little as $4,000 in the late 1860s and early 1870s, Memberships reached $80,000 by the turn of the century, reaching a high of $625,000 during the bull market of 1929 before reaching new highs of over $1 million during the 1980s stock market boom.

In 1990, a seat sold for $250,000. The highest price ever paid for a seat was $4 million on Dec. 1, 2005, followed by several seat sales at the same price.

Since the late 1970s, NYSE Members have been permitted to lease seats and their assigned trading rights to qualified individuals. 

New York Stock Exchange In Modern Times:

At the close of the market on December 30, 2005, member seat sales on the New York Stock Exchange officially ended, in anticipation of the NYSE’s plans to become a publicly traded company by way of merger with Archipelago Holdings Inc.

In 2005, NYSE seat prices have reached an historic high, quadrupling from a low of $975,000 on Jan. 11 to reach a new all-time high of $4 million in early December.That is an increase of 310%! The most recent seat sale, on Dec. 29, was for $3,505,000.

On Wednesday, Jan. 4, 2006, the NYSE conducted a Dutch auction for trading licenses. This gave Members and Member organizations the right to access the trading facilities of the NYSE market.

Until 2006, members could only join by purchasing existing seats, which were limited to a total of 1,366. In April 2006, the NYSE went both electronic and public, by merging with the already publicly traded Archipelago electronic stock exchange. The new merged company is called the NYSE Group, Inc., and the seats of the NYSE translated into shares of stock. 

Now let's go to the London Stock Exchange or LSE, better know as the City of London!

History Of The New York Stock Exchange: 1792-2011

As you can see, the New York Stock Exchange was formed in 1792! To put things in the perspective, while in Europe were Napoleonic wars, in New York city a group of 24 out of 64 traders made an agreement on 17th May 1792 and formed New York Stock & Exchange Board. The agreement was signed under a buttonwood tree. In 1863 the name of the exchange was shortened to "New York Stock Exchange" - the name it still holds today.

As the 20th century dawned, the NYSE was firmly established as one of America’s preeminent financial institutions. Trading in listed stocks had tripled between 1896 and 1899 and would nearly double again by 1901.

More space was clearly needed, the market was expanding. So the Exchange invited eight of New York City’s leading architects to join in a competition to design a grand new building.

The Exchange chose the neoclassic design of architect George B. Post. Today, the Exchange building is considered one of Post’s masterpieces and is a New York City and American national landmark.

Of course, one of the most important events in the New York Stock Exchange history happened in 1929 when the 'Great Depression' and stock market crash occurred. It is a subject about which I have done quite a lot of reading and find fascinating.

 

The Great Depression And The New York Stock Exchange:

Stock prices fell sharply on October 24 1929, Black Thursday, with record volume of nearly 13 million shares. Five days later, the market crashes on volume of over 16 million shares which is a level not to be surpassed for 39 years. On September 3 1929, the Dow Jones Industrial Average reaches its 1929 peak of 381.17.

On October 29, Black Tuesday, prices fall sharply and the stock market crashes. This crash produces a record volume of nearly 16 million shares. The Dow Jones Industrial Average falls more than 11 percent.

Other important facts about members and member firms throughout NYSE history:
-Highest price paid for a membership: $4,000,000 on December 01, 2005
-Lowest price paid for a membership: $2,750 in 1871
-First member firm to incorporate: Woodcock, Hess & Co., Inc., 1953
-First member firm to go public: Donaldson, Lufkin & Jenrette, 1970
-First member firm to be listed on the NYSE: Merrill Lynch, 1971

Until 2006, members could only join by purchasing existing seats, which were limited to a total of 1,366. In April 2006, the NYSE went both electronic and public, by merging with the already publicly traded Archipelago electronic stock exchange. The new merged company is called the NYSE Group, Inc., and the seats of the NYSE translated into shares of stock.

Now let's go and see how the NYSE seat system worked in the Seats On The New York Stock Exchange.

What Is The New York Stock Exchange (NYSE), Better Known As "Wall Street"?

The New York Stock Exchange or NYSE is a physical exchange, located at Wall Street, also knows as referred as a listed exchange – where only stocks that can be traded are one that are listed on the exchange.

NYSE is the world's largest equity market. On an average trading day there are 1.46 billion shares traded that worth around 46 billion US dollars.

NYSE listed companies are one of the world’s biggest and best. They range from 'blue-chip' companies that have been trading for decades, to young high-growth ones. At the time of the writing there are around 2800 listed companies.

The NYSE has a status called 'members'. A member firm is a company or individual who owns or leases a "seat". Only these member firms are allowed to buy and sell securities on the trading floor. The member firms must must meet rigorous professional standards set by the Exchange.

The number of seats is 1366 since 1953. Since 1868 it has been possible for members to sell or lease their seats after a change in the rules of the exchange.

Customers orders are sent by brokers to the floor brokers, who are members of the exchange. Then, floor brokers send the order to the specialist’s trading post where order is finally get executed.

Specialist who is also known as a market maker, as the name imply, specialize in one security only and his job is to make a market for it. So the specialist's job is to match buy and sell orders using open outcry. If there is a spread between bid and offered price and the trade can’t be executed in that moment, the specialist comes in with his own money or stock to close the difference. In other words – to make the market.

When trade is executed, details are reported on the tape and sent back to the brokerage house, who then notifies the customer that his trade was executed and at what price. That's the report that You and I get when we buy or sell a stock.

Now let's go to the history of New York Stock Exhange in the History Of The New York Stock Exchange.