The New York Stock Exchange (NYSE) is one of the world's largest and most influential stock exchanges. It has a long history of connecting investors with businesses, impacting global financial markets significantly.

You might already be familiar with the Australian Securities Exchange (ASX), yet the NYSE might seem distant. As an Australian investor, knowing about the NYSE can help you understand global market trends and identify opportunities beyond the local market. It could also open a door to new ways to diversify your investment portfolio.

In this article, we'll explore the NYSE in detail. We'll look at its history, how it works, and how you can invest from Australia. Now, let’s get to it.

What is a stock exchange?

A stock exchange is a marketplace where shares of companies are bought and sold. These shares represent ownership in a company. Stock exchanges make this trading easier and safer for both investors and companies.

Stock exchanges play a key role in the financial system. They help companies raise money to grow and innovate. For investors, stock exchanges offer opportunities to invest in these companies and share in their success.

What is the New York Stock Exchange?

The New York Stock Exchange is a marketplace where people buy and sell shares of publicly listed companies. Located in (you guessed it) New York City, it's one of the largest and most well-known stock exchanges globally.

The NYSE’s history dates back to 1792. It started with the Buttonwood Agreement, where 24 stockbrokers and merchants agreed to trade securities. This agreement was signed under a buttonwood tree on Wall Street, giving birth to what has become the NYSE.

In 1817, the organisation formalised its operations and adopted the name "New York Stock & Exchange Board”. It later became the New York Stock Exchange. Throughout the 19th and 20th centuries, the NYSE grew significantly. Key milestones include introducing the ticker system in 1867, which transformed how stock prices were communicated.

The NYSE has also played a central role in the financial world, surviving major events like the Great Depression and the 1987 market crash. It has since continued to evolve, embracing technology to enhance trading efficiency.

Given its size, this stock exchange has become home to many of the world's largest companies. It sets standards for transparency, investor protection, and market integrity. Understanding its history and role can provide valuable context for anyone looking to invest globally.

Why is the New York Stock Exchange so significant?

The financial sector views the New York Stock Exchange as significant for several reasons:

• It’s one of the largest stock exchanges in the world . This means it currently hosts many of the biggest and most influential companies. Investors from around the globe trade shares on the NYSE, making it a key player in global finance.
• It sets high standards for the companies it lists . Companies must meet strict requirements to be listed, ensuring they are credible and financially sound. This helps protect investors and maintain trust in the market.
• It plays a crucial role in price discovery as prices of stocks on the platform are determined by supply and demand. This process helps ensure stock prices reflect their true value.
• It has a significant impact on the global economy . The performance of the NYSE often influences other markets worldwide. Understanding trends on the NYSE can offer insights into global market movements.
• The NYSE also offers opportunities for diversification . By investing in companies listed on the NYSE, you can spread your investments across different industries and regions. This can help reduce risk and improve potential returns. However, like with any stock exchange, investing on the NYSE always carries risk.

Knowing these characteristics and potential benefits of the NYSE can help you make informed decisions about the global investment landscape.

How does the New York Stock Exchange work?

Here's how the NYSE works as a marketplace for buying and selling shares of publicly listed companies.

Primary functions

The NYSE has three main functions:

1. Facilitating trading – it brings together buyers and sellers, making it easier for them to trade shares.
2. Providing market information – it also aims to provide up-to-date information on stock prices and market activity, helping investors make educated investment decisions.
3. Ensuring a fair trading environment – it enforces rules with the intention of maintaining a fair and transparent market.

Structure and operations

The NYSE operates both a physical trading floor and electronic trading platforms. The trading floor, located on Wall Street in New York City, is where brokers and specialists match buy and sell orders. While the trading floor is iconic, most trading now happens electronically, allowing faster and more efficient transactions.

Brokers and traders play key roles in the NYSE's operations. Brokers act as intermediaries between buyers and sellers, while traders execute buy and sell orders. Market makers and specialists help ensure liquidity by being ready to buy or sell shares at publicly quoted prices.

Listing companies

For listing on the NYSE, a company must meet strict requirements. The listing process involves several steps:

1. Meet initial requirements

A company must first meet the NYSE's initial listing criteria. These include having a certain level of earnings, market value, and number of publicly traded shares. This aims to ensure the company is financially sound and ready for public trading.

2. Submit an application

The company must submit a listing application to the NYSE. This application includes detailed information about the company’s financials, business operations, and management team. The NYSE uses this information to assess whether the company is suitable for listing.

3. Undergo a review

The NYSE conducts a thorough review of the application. This involves checking the company's financial health, compliance with regulations, and overall readiness for listing. The review process intends to ensure that only companies meeting high standards are listed.

4. Prepare for an Initial Public Offering (IPO)

If the company isn’t already public, it will need to prepare for an IPO . This involves working with underwriters to set the share price and generate investor interest. The company must also file necessary documents with regulatory bodies.

5. Comply with ongoing requirements

Once listed, the company must meet ongoing NYSE requirements. This includes regular financial reporting, maintaining a minimum share price, and sticking to corporate governance standards. These requirements help keep market integrity and protect investors.

What major companies are listed on the New York Stock Exchange?

The NYSE is home to many of the world's largest and most influential companies. These companies span various industries, from technology and healthcare to finance and consumer goods. Here are ten major companies listed on the NYSE, showcasing the diversity of businesses that call this exchange home.

• Apple Inc. (AAPL) – a leading technology company known for its innovative products like the iPhone, iPad, and Mac computers. It also provides services like the App Store and Apple Music.
• ExxonMobil (XOM) – one of the largest oil and gas companies in the world. It explores, produces, and sells crude oil, natural gas, and petroleum products.
• Johnson & Johnson (JNJ) – a multinational corporation focused on pharmaceuticals, medical devices, and consumer health products. It is known for brands like Band-Aid and Tylenol.
• JPMorgan Chase & Co. (JPM) – a global financial services firm offering banking, investment, and asset management services. It’s one of the largest banks in the world by assets.
• Procter & Gamble (PG) – a leading consumer goods company. It produces a variety of household products, including brands like Tide, Pampers, and Gillette.
• Walmart Inc. (WMT) – the world's largest retailer, operating a wide network of hypermarkets, discount department stores, and grocery stores. It serves millions of customers globally.
• The Coca-Cola Company (KO) – a beverage company best known for its flagship product, Coca-Cola. It also offers a wide range of other soft drinks, juices, and bottled water.
• Visa Inc. (V) – a global payments technology company. It facilitates electronic funds transfers and is known for its credit, debit, and prepaid cards.
• Pfizer Inc. (PFE) – a leading pharmaceutical company. It develops and manufactures medicines and vaccines for various medical conditions, including COVID-19.
• The Walt Disney Company (DIS) – a diversified entertainment company. It operates media networks, theme parks, and studios. Disney is known for its movies, TV shows, and theme parks.

These companies are major players in their industries and currently contribute significantly to the global economy. Their presence on the NYSE also highlights the exchange's significant role.

How does the NYSE differ from other stock exchanges?

The New York Stock Exchange stands out among global stock exchanges due to its size, history, and influence. Compared to other exchanges around the world, the NYSE offers unique features and requirements that contribute to its reputation. While NASDAQ and the ASX are also significant players, each has distinct characteristics that set them apart from the NYSE (and each other). Here’s a comparison between the three exchanges:

Feature	NYSE	NASDAQ	ASX
Location	New York City, USA	New York City, USA	Sydney, Australia
Trading system	Hybrid (physical floor and electronic)	Fully electronic	Fully electronic
Listing requirements	Stricter financial and governance criteria	Generally less stringent	Comprehensive but varies by category
Market type	Auction market	Dealer market	Auction market
Notable companies	Apple, ExxonMobil, JPMorgan Chase	Microsoft, Amazon, Facebook	BHP, Commonwealth Bank, CSL
Total market capitalisation	Higher overall market cap	Known for tech and growth companies	Major player in Asia-Pacific region
IPO process	Traditional IPO process	Direct listings and IPOs	Traditional IPO process
Index examples	Dow Jones, S&P 500	NASDAQ Composite, NASDAQ-100	ASX 200

These differences highlight how each exchange operates and the types of companies they attract. The NYSE is known for its stringent requirements and diverse listings, while NASDAQ is famous for its technology and growth stocks. The ASX serves as a major financial hub in the Asia-Pacific region, catering to various industries and investors. Understanding these distinctions can help guide your investment decisions based on your goals and preferences.

How can I invest in stocks listed on the NYSE from Australia?

When investing from Australia, there are a few ways you can invest in stocks listed on the NYSE. Here are the main avenues:

Direct investment in US shares

You can buy shares of companies listed on the NYSE directly. To do this, you need an international brokerage account. Many Australian brokers, like Pearler , offer access to US markets. Once you set up your account, you can trade US shares as you would with Australian shares.

Investing in indices

Another way to invest in the NYSE is through indices like the S&P 500 and Dow Jones . These indices represent a group of leading companies, providing exposure to a broad market segment.

• S&P 500: This index includes 500 of the largest companies listed on the NYSE and NASDAQ. Investing in the S&P 500 can be done through exchange-traded funds (ETFs) that track this index.
• Dow Jones: This index features 30 significant companies listed on the NYSE and NASDAQ. Like the S&P 500, you can invest in ETFs that track the Dow Jones.

Managed funds and ETFs

You can also invest in managed funds or ETFs that focus on US stocks. These funds pool money from many investors to buy a diversified portfolio of US shares. Managed funds are actively managed by fund managers, while ETFs are usually passively managed and track an index.

Considerations

When investing in US stocks, be aware of currency risk , as exchange rates can affect your returns. Also take the time to understand the tax implications, as earnings from US investments may be subject to US and Australian taxes (and may require a W8-BEN form ). Consulting a financial adviser can help you navigate these aspects.

The bottom line

The New York Stock Exchange presently holds immense significance for investors worldwide. Its influence on global markets and its role in listing some of the largest companies make it an important component of the financial landscape. For Australian investors, understanding and considering the NYSE can open up diverse investment opportunities.

Keeping up with the market and information on exchanges like the NYSE can benefit your investing journey. You can do this by regularly following financial news, tracking market trends, and reviewing your investment strategy. These habits can inform you on your course towards your investment goals.