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The New York Stock Exchange (NYSE) is the world’s largest stock exchange, with the market capitalization of its listed companies clocking in at a whopping $23 trillion. More than 80% of the companies in the index are traded on the NYSE.
How Does the NYSE Work?
The NYSE is a stock exchange where the equity shares of public companies are bought and sold. The NYSE uses an auction-based system in which brokers auction shares of stock for the highest price they can get, either on a physical trading floor or an electronic system.
Selling brokers take bids on stock from brokers that represent buyers—whether that’s you purchasing a few shares for your investment portfolio or a big financial firm that’s building a position in a promising company. As shares trade hands, prices are listed and constantly updated throughout the trading day.
The New York Stock Exchange traces its origins back to 1792, and over the last two centuries it’s grown to become almost synonymous with the idea of the whole U.S. stock market. The NYSE’s headquarters building is located on the corner of Broad and Wall Street in New York, hence why “Wall Street” is often used to describe the financial system in its entirety.
Up until the beginning of the Covid-19 pandemic, the NYSE offered both electronic trading and floor trading at its physical location in New York, N.Y. In March 2020, however, it closed floor trading due to the pandemic and shifted all transactions to an electronic format. As of early April 2021, physical trading has not returned to the NYSE.
NYSE Listing Requirements
For a company to be listed and trade on the NYSE, it must be public and meet strict financial and structural standards.
To list on the NYSE, a company needs to have at least 400 shareholders and 1.1 million shares outstanding. Its share price must be a minimum of $4.00, and the market value of its publicly held shares must be at least $40 million—or $100 million for transfers and certain other listings.
In addition, the company must be profitable, earning at least $10 million over the past three years. Alternatively, a company may maintain a global market capitalization of at least $200 million. REITs require shareholders’ equity of $60 million.
Companies that want to get an NYSE listing submit their financial records, company by-laws, and information on their executives for review. If a company is approved, it’s then listed on the NYSE within four to six weeks.
NYSE vs. Nasdaq: What’s the Difference?
After the NYSE, the Nasdaq is the second largest stock exchange in the U.S., with a listed market capitalization of $19 trillion, or about $5.5 trillion less than the NYSE. The Nasdaq is a much younger institution than the NYSE, founded in just 1971. Beyond age and market cap, there are other key differences between the two exchanges:
- Exchange Systems. Until the pandemic, the NYSE supported both an electronic trading system and a floor trading system, staffed by live specialists who help facilitate the auctions taking place. The Nasdaq has been an all-electronic exchange since it was founded.
- Market Types. The NYSE uses an auction market to set prices while the Nasdaq uses a dealer market. In the NYSE’s auction market, buyers and sellers enter competitive bids simultaneously. When a buyer’s bid and seller’s ask match, the transaction takes place. With the Nasdaq’s dealer market model, all prices are set by dealers. Dealers continuously update bid prices (sell) and ask prices (buy) throughout the trading day.
- Listing Fees. There is a big difference in the cost to list on the major stock exchanges. Listing fees on the Nasdaq range from $55,000 to $80,000 for the lowest Capital Market tier. The NYSE is substantially more expensive, with a lowest listing fee of $150,000.
- Sectors. Investors typically view the NYSE as an exchange for older, more established companies. The Nasdaq tends to have newer companies focused on technology and innovation, so some investors see Nasdaq listings as riskier.
New York Stock Exchange Hours
The NYSE’s trading hours run Monday through Friday, from 9:30 a.m. until 4:00 p.m ET. The NYSE famously begins and ends each trading day with the ringing of “the bell.”
The NYSE is closed for trading on weekends and the following holidays:
- New Years Day
- Martin Luther King, Jr. Day
- Presidents Day
- Good Friday
- Memorial Day
- Independence Day
- Labor Day
- Thanksgiving Day
- Christmas Day
After-hours trading continues following the formal close of trading on the NYSE. The after-hours sessions used to be limited to institutional investors, but online brokerage firms have opened up these sessions for the average investor, meaning you can now make certain trades even after the market has closed.
