Buy low, sell high. Fear? That's the other guy's problem. Nothing you have ever experienced will prepare you for the absolute carnage you are about to witness. Super Bowl, World Series - they don't know what pressure is. In this building, it's either kill or be killed. You make no friends in the pits and you take no prisoners.
~ Louis Winthorpe III played by Dan Ackroyd
From the movie, Trading Places, Paramount Pictures 1983
Title taken from Trading Places
The days of frantic traders yelling prices and waving their arms are nearly over. The business of stock exchanges has shifted from pit trading to electronic trading, and the once dominant New York Stock Exchange has quietly been eclipsed by smaller, more competitive electronic trading venues.
From the Economist (16 Nov 2013):
Making money running a stock exchange is getting harder, thanks chiefly to increased competition. The NYSE once had a monopoly on the trading of shares in firms that listed on it, but regulators did away with that in 2000. Even so, a decade ago it still had a roughly 80% share in the public trading of American equities, according to Bernstein Research; now it accounts for less than 25%. Before ICE made its takeover bid in December of last year, NYSE Euronext’s share-price was languishing at a quarter of its peak. Although new listings in America are at their highest level in a decade after a long decline, the competition means the NYSE will struggle to capitalise on them.
(Read the full article here)
The title and quote at the top of this post refer to a popular 1980s movie starring Dan Ackroyd and Eddie Murphy. The movie depicted commodities trading, not stock trading. But the lines from the script once held true for the NYSE.
For years, the NYSE was the emblem of stock markets. Today, the New York Stock Exchange may no longer be the last bastion of pure capitalism that it once was.
What are “dark pools?” What are some of the forms of competition that the NYSE faces?
What are “derivatives?” In what ways do derivatives exchanges differ from stock exchanges?