The NYSE is the oldest major stock exchange in the United States and the one that is synonymous with Wall Street in most peoples minds.
Unlike the Nasdaq, which has no physical exchange, the NYSE has had a physical presence since 1792 in one form or another.
Prices Set by AuctionAnother big difference is that the NYSE sets stock prices by auction. The Nasdaq is a negotiated market. (See Market Markers Keep Nasdaq Humming for more information on how the Nasdaq works.)
The key player in the NYSE is the specialist a market professional who works for a specialist firm that is responsible for making a market in a particular stock.
The specialists role is that of an auctioneer. They are responsible for maintaining order in the market for a stock and posting the best buy and sell orders first.
Not that SimpleHowever, its not quite that simple. If the orders become unbalanced, the specialist must try to get the market back into order even if it means buying or selling against the market out of the companys own account to achieve some balance to the buy and sell orders.
The specialist doesnt set stock prices anymore than any other auctioneer does. Their role is to match the best prices possible for the stock.
However, the specialist can adjust the opening price of a stock if there is a large book of orders before the opening bell in the morning. The specialist can also halt trading if necessary in extreme circumstances of order imbalance.
For the most part, the specialist role remains that of matching buyers and sellers at the best price for both.
Trading VolumeEven though the specialist is a real person, a sophisticated trading network handles most of what happens. No human can keep up with trading volumes measured in the hundreds of millions of shares each day that pass through the NYSE.
The specialist makes money by pocketing the spread the difference between the bid and ask price on market orders. (See Understanding the Bid Ask Spread .) They can also trade for their own firms account and others.