How the New York Stock Exchange Works
Tracing its origins to 1792, the New York Stock Exchange today lists nearly 2,700 securities and trades about 1.5 billion shares a day. Many of the member companies are among the largest in the United States.
All together, New York Stock Exchange companies represent over three-quarters of the total market capitalization in the nation. Trading occurs on the floor of the exchange with specialists and floor traders running the show.
Specialists are the workers who are responsible for matching buyers to sellers. The specialists’ role is to be certain that the stocks for which they’re responsible are traded in a fair, competitive, orderly, and efficient market, ensuring that all customers have an equal opportunity to buy shares while receiving the best prices. The specialist seeks to avoid large or unreasonable price fluctuations between consecutive sales and usually is fairly successful.
The floor trader
The guys you see on the floor of the stock exchange waving their hands wildly to make trades are the floor traders. They’re actually members of the NYSE who trade exclusively for their own accounts. Floor traders also can act as floor brokers for others and sell their services.
The SuperDOT system
Orders from brokers not on the floor of the exchange reach specialists through the SuperDOT (Designated Order Turnaround) system. SuperDOT is a stock order entering system that can handle daily trading volume that exceeds 2 billion shares.
The SuperDOT system sends brokers messages through a common message switch to the proper specialist’s trading-floor workstation. Specialists handle these trades as buyers or sellers as particular stocks and orders become available, and they send acknowledgements to the originating brokerage firms, using the same switching system.