Private companies initially sell their stock to the public through a process called an initial public offering . But what if you want to buy and sell shares of a company that is already public? How would you go about finding someone who owns the stock that you wish to buy? And when you're ready to sell, how would you find someone who wants to buy the stock that you own? Obviously, buying and selling public stock would be very difficult without a centralized system for buyers and sellers. Fortunately, there are stock exchanges that provide just such a system, whether it be in a physical building or on a virtual network. This section takes at look at how some of these exchanges operate, how they differ from one another, and the important characteristics of each.
The New York Stock Exchange (also known by its initials, NYSE, or its nickname, the "Big Board") is the largest and oldest stock exchange in the United States. It traces its origins back to 1792, when a group of brokers met under a tree at the tip of Manhattan and signed an agreement to trade securities. Unlike some of the newer exchanges, the NYSE still uses a large trading floor in order to conduct its transactions. It is here that the representatives of buyers and sellers, professionals known as brokers, meet and shout out prices at one another in order to strike a deal. This is called the "open outcry" system and it usually produces fair market pricing. In order to facilitate the exchange of stocks, the NYSE employs individuals called "specialists" who are assigned to manage the buying and selling of specific stocks and to buy those stocks when no one else will. Specialists and traders use a three-letter ticker symbol in order to identify and trade securities on the exchange.
Of the exchanges, the NYSE has the most stringent set of requirements in place for the companies whose stocks it lists. The NYSE requires that all of its companies meet certain minimum listing requirements, including market capitalization, operating cash flow, and earnings. Companies must also provide their shareholders with certain voting rights, and they must have two or more outside directors plus an audit committee. It is important to note, however, that meeting these requirements is by no means a guarantee that the NYSE will list a company; it simply means that the NYSE will consider listing it. The NYSE still examines each company individually to ensure that it is a stable business before it decides to list it.