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What are U.S. stock, commodity, and option exchanges?

U.S. stock, commodity, and option exchanges are financial marketplaces in which individuals (usually with the assistance of a broker) buy and sell stocks, commodities and futures, and options.

New York Stock Exchange

The New York Stock Exchange (NYSE) was founded in 1792 and is the oldest and largest stock exchange in the United States. Stocks, bonds, warrants, options, and rights are traded among the trading posts located on the floor of the exchange. The NYSE has a 25-member board of directors, consisting of a chairman and CEO, 12 representatives from the public, and 12 representatives from the securities industry.

A company listed on the NYSE must meet the exchange's stringent listing requirements regarding its pretax earnings for the most recent past year, its net tangible assets, the total market value of its publicly-held listed shares, and the minimum number of shareholders for those shares. However, the NYSE stipulates that each listing application be judged on its own merits. As a result, if a company does not meet all of the listing criteria, it may still be eligible for listing if it has other positive characteristics.

You must be a member of the exchange in order to trade securities on the floor of the NYSE. Currently, full membership is limited to 1,366 seat owners. In order to become a member of the NYSE, an individual must:

  • Have attained the age of majority required to be responsible for contracts in each jurisdiction in which he or she conducts business
  • Be sponsored by two current members
  • Never have violated a securities law or committed a felony

In addition to meeting these requirements, an individual wishing to become a member of the NYSE must purchase the seat, the price of which fluctuates with market conditions. Since 1978, the NYSE has allowed its members to lease their seats to individuals who meet the NYSE membership criteria.

In 2007, the regulatory functions of the NYSE were combined with the responsibilities of the National Association of Securities Dealers (NASD) to create a new Self-Regulatory Organization (SRO) called the Financial Industry Regulatory Authority (FINRA). FINRA is responsible for writing and enforcing member regulations and arbitration procedures for more than 5,000 securities firms.

New York Futures Exchange

The New York Futures Exchange (NYFE) is a wholly owned subsidiary of the New York Board of Trade (NYBOT). The NYFE trades in futures and options on the NYSE Composite Index, the Bridge/CRB Index, the Pacific Stock Exchange (PSE) Technology Index, and the Russell 1000 Index of large cap U.S. stocks.

Nasdaq Stock Market

Originally an acronym for the National Association of Securities Dealers (NASD) Automated Quotation system, the Nasdaq Stock Market is now a subsidiary of the Nasdaq/Amex Market Group, a shareholder-owned for-profit holding company. The Nasdaq Stock Market has become the world's largest electronic stock market. Unlike other exchanges, it isn't limited to one physical location. Instead, a network of dealers buys and sells securities instantaneously through a global computer and telecommunications network.

In 1998, NASD merged with the American Stock Exchange (AMEX), the second-largest floor-based exchange in the United States. Under the terms of the merger, the AMEX equity and options markets continue to operate as a subsidiary separate from the Nasdaq Stock Market.

The Nasdaq Stock Market is really comprised of two separate markets: the Nasdaq National Market, which is the market for Nasdaq's largest and most actively traded securities, and the Nasdaq SmallCap Market, which lists emerging growth companies (companies that, once established, move up to the Nasdaq National Market). Companies based outside the United States can list on the Nasdaq Stock Market as either foreign listings or as American Depositary Receipts.

American Stock Exchange

The American Stock Exchange (AMEX) is the primary marketplace in the United States for equities, bonds, options, andderivative securities. The AMEX is second only to the NYSE in trading and dollar volume activity.

AMEX membership is comprised of regular members (those entitled to transact business in all securities traded on the exchange), options principal members (those who trade in options and derivative products), and limited trading permit holders (who may trade in options other than those on individual stocks and in some derivative products). The AMEX allows seats to be leased to individuals who meet certain AMEX requirements, and offers associate memberships to individuals who wish to have electronic access to floor trading.

On the whole, AMEX listing requirements are less stringent than those of the NYSE. Furthermore, a company that doesn't meet the listing requirements can sometimes achieve listing status if it demonstrates future earnings and viability. As a result, many companies use the AMEX as a springboard to ultimately achieving listing status on the NYSE.

Chicago Board of Options Exchange

The Chicago Board of Options Exchange (CBOE) was founded in 1973 and trades exclusively in equity, index, and interest-rate options. Originally created by the Chicago Board of Trade (CBOT), the CBOE has nonetheless always remained a separate, independent entity. The CBOE is the world's largest options exchange, accounting for the majority of all U.S. options trading, and lists options on an extensive list of widely traded stocks.

Chicago Board of Trade

The Chicago Board of Trade (CBOT), founded in 1848, began as the centralized marketplace for the grain trade and eventually became the oldest and largest derivatives (futures and futures-options) trading facility in the world. Using both open auction and electronic platform systems, the CBOT trades primarily in agricultural and precious metals futures, options contracts on grains, silver, and gold, U.S. Treasury bond and note futures, municipal index futures, and catastrophic index futures. In 1997, the CBOT launched futures and options on the Dow Jones Industrial Average. In response to the increased usage of CBOT markets by international businesses, the CBOT opened a European office in London and an Asia-Pacific office in Sydney, Australia. In 2007, CBOT merged with the Chicago Mercantile Exchange and now operates as part of the CME Group.

Chicago Mercantile Exchange

Founded in 1874, the Chicago Mercantile Exchange (CME) originated as a not-for-profit organization owned by its members. In 2000, it became a for-profit shareholder-owned corporation. The CME is a U.S. derivatives exchange that trades futures options and contracts on agriculture commodities, foreign currencies, indices, and interest rates. Recently, the CME has introduced chemical, energy, and weather derivatives. In addition, the CME has the greatest open interest (the number of futures contracts and options positions outstanding at the close of trading, and a leading indicator of a market's liquidity) of any exchange in the world.

Regional stock exchanges

Regional stock exchanges are organized national securities exchanges located in various parts of the United States. Although regional exchanges carry local listings (primarily of securities issued by companies too small to be listed on a national exchange), they also derive their business from "dual listings" or listings primarily marketed on the larger exchanges. Typically, a company listed on the NYSE and/or the AMEX will list on the regional exchanges to broaden the market for their securities.

While regional exchanges increase overall market liquidity, they are under pressure to cut costs and make technological improvements to remain viable. Of the more than three dozen regional exchanges that were in operation prior to the 1929 stock market crash, only a handful remain.

Foreign exchanges

At one time, the U.S. securities markets dominated the world financial landscape. Today, this is no longer the case. Foreign exchanges are quickly staking their place as major players on the world market stage. Foreign exchanges include, among others, European markets (London, Frankfurt, Paris, Milan, Amsterdam, and Zurich), Latin American markets (Mexico, Brazil, Argentina, and Chile), and Asia-Pacific markets (Japan, Korea, China, and Southeast Asia).


This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

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