Market Indices

A general overview of various market indices

NYSE
Introduction :
The New York Stock Exchange (NYSE) also known as the “Big Board”,
is the world’s largest stock exchange by market capitalisation. The NYSE
is located at 11 Wall Street, New York City,. It currently has been acquired
and is being operated by Intercontinental Exchange (ICE).

History of NYSE:
The foundation of NYSE dates back to 1792, its origins tracing back to
the Buttonwood Agreement signed by 24 stockbrokers on May 17, 1972
under a buttonwood tree at 68 WallStreet. This agreement established the
rules for trading securities and commissions which marked the beginning
of an organised and regularised stock market in the U.S. The agreement
initially started with government bonds and bank stocks at the time.
The NYSE grew significantly throughout the 19th century. In 1867, the
NYSE installed the first stock ticker, revolutionising how information was
transmitted between traders. By the late 1800s, the NYSE had emerged as
the dominant stock exchange in the U.S.
Major Milestones:
• 1929 Stock Market Crash: The Great Depression was triggered in
part by a massive sell-off on the NYSE in October 1929. This event led to
increased scrutiny of the market and set the stage for modern financial
regulation.
• 1971: The NYSE became a nonprofit organisation.
• 2006: NYSE merged with electronic trading platform Archipelago
and became a publicly traded company.

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 • 2013: NYSE was acquired by Intercontinental Exchange (ICE), a
global operator of exchanges and clearinghouses.

NYSE Composite Index :

In the mid-1960s, the NYSE Composite Index, a stock market index
covering all common stock listed on the New York Stock Exchange, includ-
ing American depositary receipts, real estate investment trusts, tracking
stocks, and foreign listings. Over 2,000 stocks are covered in the index, of
which over 1,600 are from United States corporations and over 360 are
foreign listings. The NYSE Composite relies primarily on market capitalisa-
tion. It is calculated. By summing the weighted average of all stocks
which are adjusted by a divisor to account for structural changes.

How the NYSE Composite is Calculated :

• Market Capitalisation:
Market Cap = Stock Price × Number of Shares Outstanding
Each stock's contribution to the index is based on its market capitalisa-
tion.
• Index Value:
Index Value = ∑ (Market Cap of each stock)
Divisor
The divisor is a number that adjusts for changes like stock splits and
ensures consistency in the index.
• Adjustments: The NYSE updates its divisor when necessary to ac-
count for corporate actions such as mergers, stock buybacks, and the
addition or removal of companies from the index.

Trade Volumes and Regulations :

The NYSE is known for its high trade volumes, handling billions of dol-
lars in securities transactions daily. It has played a critical role in the de-
velopment of U.S. financial regulations.

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 • Trade Volumes: Daily trading volumes on the NYSE often exceed
3-4 billion shares, particularly during high-volatility periods.
• As of 2023, the average daily trading volume hovers around 2.5-
3 billion shares.
• Regulation:
• The U.S. Securities and Exchange Commission (SEC) oversees
the NYSE and ensures that market practices are fair and transparent.
• The NYSE operates under strict rules, ensuring that all trades are
executed transparently, and stock prices are determined based on
supply and demand.
• Circuit breakers were introduced to prevent market crashes like
the one in 1987 ("Black Monday"). These measures temporarily halt
trading if the market falls too sharply in a single day.

Types of Securities Traded on the NYSE :

• Common Stocks: The majority of the volume on the NYSE comes
from the trading of common stocks, which represent ownership shares in
publicly traded companies. Over 2,400 companies are listed on the ex-
change, encompassing a wide variety of industries, such as technology,
healthcare, energy, consumer goods, and finance.
• Preferred Stocks: These are shares of a company that have a higher
claim on assets and earnings than common stock, typically offering fixed
dividends. Preferred stocks are less frequently traded compared to com-
mon stocks but provide more stability and income potential for in-
vestors.
• Bonds: The NYSE offers a wide array of corporate bonds and govern-
ment bonds, which allow investors to lend money to corporations or gov-
ernments in exchange for periodic interest payments and repayment of
the principal at maturity. Bonds are often seen as lower-risk investments
compared to stocks.
• Exchange-Traded Funds (ETFs): ETFs represent a basket of securi-
ties that can be bought and sold on the exchange, similar to individual
stocks. ETFs have grown in popularity due to their flexibility, liquidity,

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 and lower expense ratios. As of 2023, there are over 2,000 ETFs listed on
the NYSE, covering various sectors, regions, and asset classes.
• Closed-End Funds (CEFs): These funds issue a fixed number of
shares through an initial public offering (IPO) and are traded on the open
market. Unlike ETFs, CEFs do not issue or redeem shares daily, and their
prices can fluctuate based on market demand and supply.
• Structured Products: These are complex financial instruments de-
signed to meet specific investor needs, typically combining different ele-
ments of bonds and derivatives to provide tailored risk and return pro-
files.
• Derivatives: The NYSE also offers derivatives like options and fu-
tures contracts, which are financial contracts that derive their value from
an underlying asset, such as a stock, bond, or commodity. Derivatives
are often used for hedging or speculative purposes.

Growth of the NYSE :

The New York Stock Exchange (NYSE) has grown into the world’s
largest stock market by market capitalisation, reaching $24 trillion in
2023. Its growth has been driven by an increasing number of listed com-
panies, technological innovations, and its global presence.
Expansion of Listings and Market Capitalisation: Today, the NYSE lists
over 2,400 companies from various industries. It has become a key plat-
form for Initial Public Offerings (IPOs), hosting some of the world’s largest
companies like Alibaba, Uber, and Snowflake. These IPOs have contributed
significantly to the NYSE’s growing market capitalisation and global promi-
nence.
Technological Advancements: Technological advancements have
played a critical role in the NYSE’s evolution. In the 1970s and 1980s,
computerised trading systems improved trading speed and accuracy. By
the early 2000s, the exchange fully adopted electronic trading, increasing
efficiency and transaction volumes, with daily trading reaching 2.5-3 bil-
lion shares.

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 The emergence of high-frequency trading (HFT) has also accelerated
the growth of trading volumes, allowing trades to be executed in millisec-
onds. This shift has improved market liquidity and increased the NYSE's
capacity to handle large-scale trading operations.
Global Reach and Influence: The NYSE has attracted more than 500
international companies from over 40 countries, cementing its position as
a global exchange. International firms, such as Alibaba and Toyota, have
chosen to list on the NYSE, reflecting its prestige and global influence.
The Future of the NYSE: With advancements in AI, blockchain, and
other technologies, the NYSE is poised to continue growing. Its strategic
mergers, including with Euronext in 2007 and its acquisition by Interconti-
nental Exchange (ICE) in 2013, ensure it remains a leader in the global fi-
nancial markets.

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Top Companies in the NYSE :
The NYSE is home to companies from a broad range of sectors, in-
cluding technology, healthcare, finance, industrials, energy, and consumer
goods. While it initially catered to U.S. companies, the NYSE has become a
global platform, with numerous international firms seeking to list on the
exchange. The companies listed on the NYSE represent over 11 sectors,
including Technology, Healthcare, Financials, Energy, Consumer Goods
Some of the top companies as of today are listed below :
• Boeing
• General Motors
• Citigroup
• Bank of America
• AT&T
• Caterpillar
• Ford Motor
• Walt Disney
• Deere&Company
• FedEx
• General Mills
• Corning
• Goldman Sachs
• JPMorgan
• Kimberly-Clark
• Coca-Cola
• McDonald’s
• Eli Lilly
• Merck&Co
• 3M
• Pfizer
• Apple Inc. (AAPL)
• IBM
• Oracle

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Listing Requirements in NYSE :
To be listed on the NYSE, companies must meet strict criteria regard-
ing financial performance, size, and governance:
• Minimum Market Cap: Companies must have a minimum market
capitalisation of $40 million.
• Earnings: They must demonstrate a certain level of earnings be-
fore taxes, as well as positive cash flow.
• Corporate Governance: Companies are required to comply with
stringent corporate governance standards, ensuring transparency and
accountability to shareholders.

Conclusion :
The New York Stock Exchange (NYSE) has evolved from a small local
marketplace to the largest and most influential stock exchange in the
world. Its growth has been fueled by a combination of technological ad-
vancements, global reach, and strategic mergers. With a market capitali-
sation of around $24 trillion and over 2,400 companies listed, the NYSE
continues to lead the global financial markets. As it embraces emerging
technologies like AI and blockchain, the NYSE is well-positioned to main-
tain its dominance and continue driving innovation in the financial world
for years to come.

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