Stock market

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It costs money it become an Exchange member. There are about 650 memberships or seats on the NYSE, owned by large and small firms and in some cases by individuals. These seats can be bought and sold; in 1986 the price of a seat averaged around $600,000. Before you are permitted to buy a seat you must pass a test that strictly scrutinizes your knowledge of the securities industry as well as a check of experience and character.

Apart from the NYSE and the AMEX there are also regional exchange in the US, of which the best known are the Pacific, Midwest, Boston and Philadelphia exchange.

There is one more market place in which the volume of common stock trading begins to approach that of the NYSE. It is trading of common stock over-the-counter or OTCthat is not on any organized exchange. Most securities other than common stocks are traded over-the-counter. For example, the vast market in US Government securities is an over-the-counter market. So is the money marketthe market in which all sorts of short-term debt obligations are traded daily in tremendous quantities. Like-wise the market for long-and short-term borrowing by state and local governments. And the bulk of trading in corporate bonds also is accomplished over-the-counter.

While most of the common stocks traded over-the-counter are those of smaller companies, many sizable corporations continue to be found on the OTC list, including a large number of banks and insurance companies.

As there is no physical trading floor, over-the-counter trading is accomplished through vast telephone and other electronic networks that link traders as closely as if they were seated in the same room. With the help of computers, price quotations from dealers in Seattle, San Diego, Atlanta and Philadelphia can be flashed on a single screen. Dedicated telephone lines link the more active traders. Confirmations are delivered electronically rather than through the mail. Dealers thousands of miles apart who are complete strangers execute trades in the thousands or even millions of dollars based on thirty seconds of telephone conversation and the knowledge that each is a securities dealer registered with the National Association of Securities Dealers (NASD), the industry self-regulatory organization that supervises OTC trading. No matter which way market prices move subsequently, each knows that the trade will be honoured.


When an individual wants to place an order to buy or sell shares, he contacts a brokerage firm that is a member of the Exchange. A registered representative or RR will take his order. He or she is a trained professional who has passed an examination on many matters including Exchange rules and producers.

The individuals order is relayed to a telephone clerk on the floor of the Exchange and by the telephone clerk to the floor broker. The floor broker who actually executes the order on the trading floor has an exhausting and high-pressure job. The trading floor is a larger than half the size of football field. It is dotted with multiple locations called trading posts. The floor broker proceeds to the post where this or that particular stock is traded and finds out which other brokers have orders from clients to buy or sell the stock, and at what prices. If the order the individual placed is a market orderwhich means an order to buy or sell without delay at the best price availablethe broker size up the market, decides whether to bargain for a better price or to accept one of the orders being shown, and executes the tradeall this happens in a matter of seconds. Usually shares are traded in round lots on securities exchanges. A round lot is generally 100 shares, called a unit of trading, anything less is called an odd lot.

: 3/03/2010