Those who own stock and wish to trade it will have their stocks traded on what is known as an exchange. An exchange is simply a location (real or virtual) where traders wishing to buy and sell come together. The most renown exchange in the world is the “New York Stock Exchange” (NYSE). This exchange, also referred to as the “Big Board” is the largest and first exchange created in the United States. It was established in 1792 by the signing of the Buttonwood Agreement. Merchants and stockbrokers, 24 of them from New York, signed this agreement and thus began the NYSE. Today this exchange trades stocks for some of the world’s largest companies including Coca-Cola, Citigroup, General Electric, Wal-mart, Gillette and even McDonalds.
Today NYSE continues to be the type of exchange where people come together on the trading floor to make their trades face-to-face. Also called a listed exchange, this is where brokerage firms send their orders to members of the exchange who ensure that these trades are received down on the floor by brokers. These brokers must go to pre-arranged spots on the floor where stock trades are made. These floor locations, also called “trading posts” are run by specialists who match buyers with sellers for their particular stocks. The value of these stocks are determined by the “auction method.” This is done by setting the price of the stock at the highest amount that a buyer is willing pay for the stock and the lowest price is determined by setting it at the lowest price a seller is willing to sell it for. Once a trade has gone through and been accepted this information along will the details of the trade are sent back to the brokerage firm. The brokerage firm then forwards this information to the original investor. Though there is a great deal of human interaction in this process the NYSE is not just the old way of doing trades; computers are used extensively throughout the trading process.