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Exchanges in EXANTE terminal: NYSE
07
Sep
Exchanges in EXANTE terminal: NYSE

 

It is no secret that the most important advantage of the EXANTE trading platform is that it gives access to a wide variety of stock exchanges and instruments from single account. Our clients can now trade on over 45 markets, and this number is constantly growing. Today we are starting a series of articles on the world's leading stock exchanges to give you an insight into their history, their individual aspects, and their roles in the modern global economy. We will also touch on the companies that trade their stocks at these exchanges, and why these companies are of interest to the stock trader. Let's begin with the world's most famous stock exchange, the New York Stock Exchange, or the NYSE.

The NYSE's Place in the Global Economy

The NYSE is considered to be the world's leading stock exchange – the "default stock exchange", in a sense. There is a good reason for that. The NYSE has a significant lead in its total market capitalization (or "market cap"): over $19 trillion ($19T). Its closest competitor, the NASDAQ, only has a third of that amount. The NYSE is also the world's leader in its number of listed companies – around 4,000 – and its monthly trading volume ($1.5T). However, the NYSE's lead in these aspects is not as great. For example, the NASDAQ lists 3,200 companies with a monthly trading volume of $1.2T. In fact, some commodity exchanges, such as the Chicago Mercantile Exchange, have an even greater monthly trading volume than that of the NYSE. However, commodity exchanges are another story entirely.

The majority of the United States' most famous companies – Coca-Cola, Boeing, Pfizer, Ford, Walt Disney, McDonald’s – trade their stocks at the NYSE. It is the NYSE's price quotations that served as a basis for the oldest of the world's most well known stock indices – the Dow Jones Industrial Average. The NYSE's listed companies occupy the majority of the highest positions in the leading stock indices of the US and the world (excluding those that specialize in smaller companies or companies from countries with a developing economy). Dow Jones, Global Dow, S&P 500 – the largest companies in all of these indices trade their stocks at the NYSE. 


This is the NYSE's most famous building at Wall Street. This area of New York City is so cramped that photographers have to use a number of tricks to take a picture of the building's façade.

The NYSE is not just a stock exchange, it is a symbol of world trade. Even the name of the street where it is located – Wall Street – has become a synonym for financial institutions as a whole. The NYSE's prestige is so great that all the world's leading online brokers try to give their users access to it. Many companies that already trade their stocks on other major stock exchanges (such as those in Europe or Asia) try to trade on the NYSE as well. Since many companies trade simultaneously on one of their national stock exchanges and on the NYSE, its total market cap encompasses 60% of the world's stock market (this does not mean, however, that its market cap is greater than that of other stock exchanges combined).

History

The NYSE is one of the world's oldest stock exchanges. It was founded in 1792, though its actual history dates even farther back. For a long time American brokers of the 18th century traded their shares in New York City's coffee houses, and only after a while did they decide to follow the example of their European colleagues and take their business to a more formal setting.

The NYSE did not become a world financial leader right away. The 19th century's financial world was dominated by the United Kingdom and its London Stock Exchange (LSE). However, after World War I in the 20th  century, American economy managed to challenge that of Britain in earnest. The NYSE overtook the LSE and took the world's first place by market cap.

For the majority of the 20th century the NYSE kept its position as the world's leading stock exchange. However, the exchange's position has not always been secure. In 1929 it was the NYSE that suffered a collapse of its market prices, with the Dow Jones index falling by 40%. That collapse lead to the Great Depression. To be fair, we should note that the same index fell by 50% in 2007-2009, but fortunately, no such consequences followed  then. Past disasters taught the world's nations to approach such events with a cooler head. Another challenge the NYSE had to face in the 20th century was the rise of the Tokyo Stock Exchange (TSE) in the 1980s. For a short while, the TSE managed to overtake the NYSE as the world's leading stock exchange. However, the Japanese economy of the time turned out to be a bubble that deflated slowly in the 1990s, and the NYSE reclaimed its position as the world's financial leader.

Legal Aspects

The NYSE's prestige has its disadvantages, such as the difficulty of its requirements to its listed companies and brokers. Only 1366 of its listed companies have a right to take part in the stock exchange's business directly (such as trading shares without any input from brokers). That number has not changed since the mid-20th  century. A member company's spot can be bought, but its price can be as high as $3 million ($3M). If a joint-stock company wants to start trading shares on the NYSE (in other words, get a listing on it), it must meet a number of stringent requirements.

•    It must be large enough as a commercial enterprise. In particular, its earnings before tax (EBT) for the previous year must be at least $2.7M, and its revenue for the last two years must be no less than $3M. The company's net tangible asset amount must be no less than $18M. 
•    It must be large enough as a joint-stock company. It must have no less than 2,000 major shareholders that own no less than 100 shares each, and the total market value of the company's publicly held shares must be no less than $1.1M. 
•    Its shares must be popular. Its average monthly trading volume must be at least $100,000 for the last 6 months. 

Today the NYSE is not an autonomous company. In 2007 it became part of the NYSE Euronext conglomerate, merging it with the majority of Europe's major stock exchanges (the total market cap of NYSE Euronext is currently around $30T), and in 2013 it was absorbed by the Intercontinental Exchange (ICE) holding company. In practice, however, the NYSE retains its autonomy in many ways, and is still usually seen as a stock exchange in its own right.

Another subsidiary of ICE is the NYSE Arca electronic stock and option exchange. Despite having "NYSE" in its name, it is another exchange distinct from the NYSE that specializes in trading exchange-traded funds, or ETFs. They include the famous SPY and IDA funds, whose price is proportional to the S&P 500 and Dow Jones index values. If one purchases these funds, one can earn revenue from changes in price quotations for whole indices, rather than those of individual shares. We will go into further detail about NYSE Arca in one of the later articles in this series.

What Investors Should Keep in Mind

To start trading stocks on the NYSE, one must have an account at any of the stock brokers that have access to it. This access should not be granted through any stand-in means such as contracts for difference (CFDs), but only through direct market access (DMA), which is, by the way, granted by EXANTE.

Out of the thousands of companies that trade their stocks on the NYSE, it is not easy to single out ones that would be the most attractive in terms of investment. However, many of our readers would probably like to know which companies hold the leading positions according to specific criteria.

The largest market cap is held by Berkshire Hathaway, a financial company held by the billionaire Warren Buffett (ticker symbols BRK.A and BRK.B). Its market cap equals $373 billion ($373B). The next positions are held by the Exxon Mobil oil and gas company (ticker symbol XOM, market cap $360B), the General Electric energy company (founded by Thomas Edison in the 19th century, ticker symbol GE, market cap $280B), the AT&T telecommunications company (founded by Alexander Graham Bell, the inventor of the telephone, also in the 19th century, ticker symbol T, market cap $251B). AT&T also boasts decent annual dividends (around 5%) and 52-week price increase (23%).

The largest 52-week price increase – 586% - was shown by Resolute Energy (ticker symbol REN), a relatively small oil and gas company, while the highest dividends over a year – 42% – by an even smaller oil and gas company, GulfMark Offshore (ticker symbol GLF). On the whole, it is companies in the extractive sector that are on the rise this year – in particular, the gold mining companies. These include DRDGOLD (ticker symbol DRD, 52-week price increase 352%), Harmony Gold Mining (ticker symbol HMY, 52-week price increase 296%), and Barrick Gold (ticker symbol ABX, 52-week price increase 151%).

The most expensive shares are also those of Berkshire Hathaway Inc: they cost $225,000 each. And even though such a price can seem strange today, these shares are still being purchased by someone every day. The company does not make more than a few dozen deals every day, however, which isn't a lot for the NYSE. Other shares at the NYSE cost no more than $1700, and their daily trading volumes number in the millions. The year's most popular shares are those of Bank of America (ticker symbol BAC, market cap $186B). They cost only $16 each, and their average trading volume is 74 million shares per day.

The NYSE is open from 17:30 to 00:00 Moscow time (9:30 to 16:00 New York time). The full list of publicly held companies can be seen on the Stock Screener service at finance.google.com (choose "United States" in the first box, then "New York Stock Exchange (NYSE)" in the second). There, one can see the companies' ratings according to several criteria by clicking on the criterion captions: Div yield (%) for dividend values, 52w price change, 
Market Cap.

Each online broker charges a commission when a client deals with the NYSE. Because of the exchange's reputation, the commission is usually low, $0.02 per share or lower. However, most brokers also have a minimum commission per deal (for example, $1 and above), regardless of the number of shares traded. EXANTE does not have a minimum commission per deal, and only charges $0.02 per share.

 

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