Historically, the physical location, called
the floor, has been the defining feature of a securities exchange.
Buying and selling traditionally takes place
auction
style
on the exchange floor, with floor brokers and traders
bidding against each other for the best price.
Over the last few years, however, many exchanges
around the world have abandoned their trading floors for totally
electronic environments. But the largest U.S. stock exchanges
— the NYSE and the American Stock Exchange (AMEX) —
have integrated electronic trading, especially for smaller orders
brokers place for individual investors, while maintaining more
traditional floor trading for larger scale orders.
To trade stocks on the exchange floor, a
brokerage firm must be a member of the exchange — in other
words, own a seat on the exchange. Seats are limited and expensive,
but broker-dealers who don’t belong to the exchange can route
their orders through a member firm.
