Stock Exchanges: The NYSE and AMEX

In these big stock exchanges, stocks are sold at auction. Specialists on the floor of the exchange handle the trades for a big company or a few smaller, lower-volume companies, and put buyers and sellers together for the company stocks they represent. When there's no one to buy a stock that's up for sale, the specialist may buy it for the company. Trading posts are equipped with a computer, and the specialist enters trades on the computers, and the sale information is delivered all over the world, immediately.

The large brokerage firms are represented by "floor brokers". The floor broker delivers the incoming bids throughout the day to the specialists (also called "traders", usually by shouting over everyone else; sometimes by using sign language. So the traders know from a distance and in a hurry who they're trading with, the floor brokers wear distinctively colored jackets that identify them as members of a particular brokerage.

Like all products for sale, the price changes depending on supply and demand. If a stock is in high demand, there are fewer shares available than there are buyers to purchase them, and the price goes up as the competition increases. If there are more shares available than there are people who want to buy them, the price drops until buyers regain their flagging interest and start bidding again.

Although the stock exchange floor has been featured in films as a place where high drama is enacted, around 80% of the actual trading is done in offices away from the noise of the floor. Traders at computer terminals take care of the smaller individual transactions, and traders among mutual funds and other large institutions use dedicated computer networks, totaling a bigger portion of the actual business of buying and selling shares. More than a third of the NASDAQ takes place over Electronic Computer Networks (ECNs) like Archipelago, Instinet and Island. Some investors use the ECNs to trade directly with other investors, and can do so every hour of the day. Wherever the trading takes place, the information is transmitted to the large exchanges and counted in the daily trading volume.

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