More than 200 years ago, a group of twenty-four Wall Street merchants signed a document called the Buttonwood Agreement. The agreement laid out all the rules for buying and selling shares of public stock, including the price for a trading seat. Their rules, which transformed over time, are the framework for today’s rules of trading and the foundation of the New York Stock Exchange (NYSE).
The NYSE, also known to insiders as the Big Board, is home to many prominent industry players like Wal-Mart Stores, Coca-Cola, and McDonald’s. The Big Board is not a place for small companies. Among other requirements for inclusion on the NYSE, a company must have at least 1.1 million publicly traded shares of stock outstanding, with a market value of at least $100 million. It must show pretax income of at least $10 million over the three most recent fiscal years, and have had earnings of at least $2 million in the two most recent years.
Until around ten years ago, traders and brokers had to vie for coveted “seats” on the NYSE, but all that changed when it transformed into a publicly traded corporation. Now, those seats are actually equity memberships, though many still refer to them as seats. What hasn’t changed: The same strict regulations govern which professionals may obtain one-year licenses to trade on the exchange, and regulators keep close tabs on their compliance and ethical behavior.
Actual Seats on the Exchange
In the very earliest days of the U.S. stock exchange, all the way up through the Civil War, traders sat in assigned seats and waited. Back then, deals were arranged in a “call market” fashion: Stocks were traded one company at a time, and only once their names were called. That changed after 1871, when shares could be traded at any time, and the “seats” were no longer literal. Those seats on the NYSE didn’t come cheap, either. The lowest amount paid for a seat, way back in 1871, was $2,750; the highest price paid for a single seat was $4 million paid in December 2005.
With more than $19 trillion in total market capitalization listed (as of April 2016), the NYSE is the largest stock exchange in the world by market capitalization, or market cap, which is the market value of a company in terms of its outstanding shares. The NYSE holds more than a quarter of the total worldwide equities market. Every day on the NYSE, more than 450 billion shares are available for trading.
