NYSE: The Market for Innovation

NYSE: The Market for Innovation

Grace Devlin
Corporate Communications, New York Stock Exchange

August 23, 2021

Technology is the cornerstone of the New York Stock Exchange. With more than two-thirds of tech IPO proceeds raised on the NYSE since 2014, our listed company community includes today’s most innovative disruptors. As the world’s largest stock market where an average 2.4 billion shares exchange hands each day, the NYSE is also powered by a cutting-edge, dynamic technology infrastructure that is unrivaled in the financial markets.

On the NYSE Trading Floor, the only in-person trading venue for a global equities exchange, technology is augmented by both human oversight via Floor Brokers and accountability via Designated Market Makers (DMMs), who have a regulatory obligation to maintain fair, orderly and liquid markets in their assigned securities. This hybrid model creates the optimal trading environment for securities, delivering dampened volatility, tighter spreads and deeper liquidity.

NYSE Trading Floor

The integrated NYSE market model is on full display during the price discovery process for opening a stock. Each of the 2,300+ listed companies at the NYSE starts its journey with an initial listing day, whether through an IPO, Direct Listing, SPAC business combination or spin-off. As a company awaits its First Trade, floor brokers gather around the post of the DMM to hear the latest price indications as the order book is built.

As the brokers circle the DMM post, they use handheld devices to communicate information from the point-of-sale back to their clients, who are typically institutional investors and investment funds. While the order book is built electronically, brokers watch the market develop and analyze trends with close proximity to the timeliest information.

The NYSE is the only listing venue in the world to provide this dynamic combination of human judgment and technology for each listed company’s stock. Each facet of the model has its assets, but together, this synergy adds value that is greater than the sum of these individual advantages. Think of a symphony and its players: the instruments together create a sound that’s impossible to achieve independently. With progressive technology, traders and DMMs in harmony, stocks trade better on the NYSE from the Opening Bell through the Closing Auction.

The technology underpinning trading floor operations is NYSE Pillar, the most sophisticated trading platform in the world. In addition to streamlining order types, terminology and messaging across all five NYSE Group equity markets, Pillar delivers industry-leading determinism. In other words, it is the most stable and consistent platform in terms of system responsiveness, which is essential for market participants to manage their execution risk throughout each trading day and is especially critical during times of market volatility. Less risk means better prices for investors.

Take March 2020 for example. Extreme market swings driven by the onset of the coronavirus pandemic led to historic trading and messaging volumes flowing through the NYSE. At the height of the volatility, NYSE Group systems processed nearly 330 billion messages in a single day. Market participants reported more consistent response times from the NYSE during this volatile period that were comparable to those experienced under stable conditions.

Dependability and resilience are paramount when the market is in flux. The alternative undermines investor confidence and potentially adds fuel to the fire of a downward turn. While dark pools and other alternative trading systems handle less trading during times of extreme volatility, the NYSE’s trading framework is built to take on extraordinary levels of activity at any time, without missing a beat. The technology is also designed to continuously evolve and expand in capacity, so that even on record-shattering days there is always headroom to handle more.

Markets are unpredictable and respond to world events big and small, from a fast-spreading virus to a late-night tweet. It is impossible to know for certain how the news cycle will impact investor decisions on a daily basis, so the NYSE is perpetually prepared, with a tradition of innovation that not only future proofs for the unexpected events of tomorrow, but also extends opportunity and access to the capital markets today. This mindset has allowed the Exchange to thrive for more than 229 years and will continue to define the NYSE as the beating heart of modern global capitalism for years to come.