How Does Floor Trading Work on the New York Stock Exchange - Wall Street Stock Market
Floor trading is where traders or stockbrokers meet at a specific venue referred to as a trading floor or pit to buy and sell financial instruments using open outcry method to communicate with each other. These venues are typically stock exchanges or futures exchanges and transactions are executed by members of such an exchange using specific language or hand signals. During the
1980s and
1990s phone and electronic trading replaced physical floor trading in most exchanges around the world.
As of 2007 few exchanges still have floor trading. One example is the
New York Stock Exchange (
NYSE) which still executes a small percentage of its trades on the floor. That means that the traders actually form a group around the post on the floor of the market for the specialist, someone that works for one of the NYSE member firms and handles the stock. Just like in an auction, there are shouts coming from those that want to sell and those that want to buy. The specialist facilitates in the match and centralizing the trades.
On
January 24, 2007, the NYSE went from being strictly an auction market to a hybrid market that encompassed both the auction method and an electronic trading method that immediately makes the trade electronically. A small group of extremely high-priced stocks isn't on this trading system and is still auctioned on the trading floor.
Even though over 82 percent of the trades take place electronically, the action on the floor of the stock exchange still has its place. While electronic trading is faster and provides for anonymity, there's more opportunity to improve the price of a share if it goes to the floor. Investors maintain the right to select the method they want to use.
http://en.wikipedia.org/wiki/Floor_trading
On
October 19, 1987, the
Dow Jones Industrial Average (
DJIA) dropped 508 points, a 22.6% loss in a single day, the second-biggest one-day drop the exchange had experienced.
Black Monday was followed by
Terrible Tuesday, a day in which the
Exchange's systems did not perform well and some people had difficulty completing their trades.
Subsequently, there was another major drop for the Dow on
October 13,
1989; the Mini-Crash of 1989.
The crash was apparently caused by a reaction to a news story of
a $6.75 billion leveraged buyout deal for
UAL Corporation, the parent company of
United Airlines, which broke down. When the
UAL deal fell through, it helped trigger the collapse of the junk bond market causing the Dow to fall 190.58 points, or 6.91 percent.
Similarly, there was a panic in the financial world during the year of
1997; the
Asian Financial Crisis. Like the fall of many foreign markets, the Dow suffered a 7.18% drop in value (554.26 points) on
October 27, 1997, in what later became known as the 1997 Mini-Crash but from which the DJIA recovered quickly. This was the first time that the "circuit breaker" rule had operated.
On
January 26,
2000, an altercation during filming of the music video for "
Sleep Now in the Fire", which was directed by
Michael Moore, caused the doors of the exchange to be closed and the band
Rage Against the Machine to be escorted from the site by security[15] after band members attempted to gain entry into the exchange.[16] Trading on the exchange floor, however, continued uninterrupted.[17]
In the aftermath of the
September 11, 2001 terrorist attacks, the NYSE was closed for 4 trading sessions, one of the longest times the NYSE was closed for more than one session; only the third time since
March 1933.
On May 6,
2010, the Dow Jones Industrial Average posted its largest intraday percentage drop since the October 19, 1987 crash, with a 998
point loss later being called the
2010 Flash Crash (as the drop occurred in minutes before rebounding). The
SEC and
CFTC published a report on the event, although it did not come to a conclusion as to the cause. The regulators found no evidence that the fall was caused by erroneous ("fat finger") orders.[18]
On
October 29,
2012, the stock exchange was shut down for 2 days due to
Hurricane Sandy.[19] The last time the stock exchange was closed due to weather for a full two days was on
March 12 and 13 in
1888.[20]
On May 1, 2014 the stock exchange was fined $
4.5 million "to settle charges it violated market rules, the
Securities and Exchange Commission said Thursday."
http://en.wikipedia.org/wiki/New_York_Stock_Exchange