Governance Issues at the New York Stock Exchange

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Themes: Coporate Governance
Period : 2003-2004
Organization : NYSE
Pub Date : 2004
Countries : USA
Industry : -

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Case Code : BECG035
Case Length : 20 Pages
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The Working of NYSE

NYSE is defined as a "member-owned co-operative and self-regulatory organization that serves the public as the nation's principal securities market, its principal self-regulator and its principal source of governance standards."¹⁹ It comprises of three constituencies, viz., broker-dealer members, listed companies and the investing public. The specialist firms and floor brokers are grouped under broker-dealer members. The specialist firms employ specialists involved in the trading of stocks of particular companies. At NYSE, trading takes place at one central location - the trading floor (Refer Figure I) where both buyers and sellers compete to get best price for their clients. Usually, each stock is assigned a trading post, with specialists managing the auction process.

FIGURE I
TRADING FLOOR

A - Post information display provides market information to specialist.
B - Flat panel display screen, which enables brokers to know prices of each stock.
C - Point of Sale Display Book enables specialist to handle volumes.
D, E - Brokers who execute customer buy/sell orders.
F - Specialist- order book for which the specialist has agency responsibility, assists in the recording and dissemination of trades and quotation changes, and facilitates the research of orders.
G - Specialist trading assistant working at point-of-sale workstation.
H, I - New York Stock Exchange Wireless Data System (WDS) transfers information to and from point-of-sale. Brokers were provided with an advance Hand Held Device (HHD) enabling them to receive orders electronically.

Source: www.nyse.com

NYSE has the authority to regulate securities firms dealing with public accounts in the US. The Enforcement Division oversees the working of listed companies. It is given powers to take disciplinary actions against firms violating the listing and disclosure rules of the exchange as well as ensuring the transparent working of the listed companies. NYSE also oversees the working of broker-dealer members to ensure a free and fair market.

Governance Structure at NYSE (Pre-reform)

NYSE's governance structure comprised five important elements: the Board of Directors (BoD), standing and advisory committees, a nominating committee, its professional executive management, and its 'not-for-profit' status.

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19] www.nyse.com