How Does the Stock Market Trading Floor Work?
The New York Stock Exchange
The New York Stock Exchange is the largest stock-market trading floor in the world. It provides a platform for people to trade shares of stock in companies that are registered for public trading. Floor traders execute these transactions on behalf of investors. The best way to explain how this system works is to look at the step-by-step process of one simple trade.
A Stock Transaction
Let's say you'd like to buy 100 shares in Home Depot. You could call or email a stockbroker and tell her to you want to make that purchase. Your broker would then alert one of the floor clerks for her brokerage house, who would find another clerk who is willing to sell 100 shares of Home Depot. These clerks gather around posts, where a specialist broker brings buyers and sellers together and manages the open-auction market environment. The buyer and seller agree on a price and make the exchange. After making the exchange, the floor clerk then notifies your broker, who notifies you. The process usually takes a few minutes or longer, depending on the market and the stock involved. Today, these trades all usually happen electronically.
Hundreds of Thousands of Trades
The example in the previous step is of one simple trade, but multiply this one trade by hundreds of thousands of transactions, and you have the chaotic atmosphere you see at the New York Stock Exchange.
Trades involving large blocks of assets, securities and derivatives---such as the bundling and trading of subprime mortgages, which eventually affected the economy so negatively---are far more complex.
