How the NYSE Makes Money
Stock exchanges allow investors and traders to make money by providing them with a marketplace for trading securities. They also allow companies to raise money by listing different kinds of securities. Exchanges collect transaction fees from market participants and companies in exchange for providing such services. They also offer various products and services used for trading and related activities.
The New York Stock Exchange (NYSE) is one of the world’s largest stock exchanges. Its origins date back to 1792. Located on Wall Street in New York City, the NYSE has one trading floor used for equities and another for its options exchange. This article explores the various sources of revenue and income for the NYSE.
Key Takeaways
- The New York Stock Exchange is among the largest stock exchanges in the world.
- It maintains an efficient marketplace with fair price discovery while ensuring sufficient market liquidity.
- Listing companies pay the exchange one-time listing fees along with annual fees.
- Market data constitute a large portion of revenue earnings.
- Other revenue streams include trading software and technology, registration and regulatory fees, and NYSE governance services.
Transaction Fee Revenue
People come to the NYSE as it maintains an efficient marketplace with fair price discovery and ensures sufficient liquidity in the market. The NYSE charges fees in various forms to these market participants. Each trade that occurs on the NYSE attracts a transaction fee from the trading parties.
All trades occur through registered market participants, including brokerage firmstrading houses, and asset management companies. In addition to the transaction fee, these participants also pay a one-time registration fee and a recurring annual membership fee to the NYSE.
Individuals who are interested in investing in the NYSE can do so by purchasing shares of the Intercontinental Exchange (ICE)or a related index fund, such as the SPDR Dow Jones Industrial Average ETF Trust (THERE).
Listing Fee Revenue
Companies that need capital can raise money by listing their securities on the NYSE after meeting certain eligibility criteria. They need to pay a one-time listing fee and then a recurring listing fee annually and trading services on the NYSE platform. Equities remain the most common securities listed, but the NYSE allows other instruments to be listed, including:
The initial one-time listing fee is usually based on the total number of shares to be listed through the issue. After that, the NYSE charges fees based on corporate actions, like the issuance of additional shares through a rights issue, bonus issueand stock splitamong others.
There are more than 2,400 companies listed on the NYSE. Listings amount to more than $28.8 trillion in market capitalization. Roughly 97% of listings are in the energy and utilities sector followed by financials (89%). Industrials, consumer goods, and health care made up 82%. 65%, and 71% of listings, respectively.
Data Fee Revenue
Market data constitute a large portion of revenue earnings for the NYSE. This includes real-time data, historical data, summary data, and reference data. Market participants need historical data for research and analysis, real-time data for ongoing trading and investment activities, summary data for reporting and auditing, and reference data for security-specific details like symbols and corporate actions.
Based on its proprietary data, the NYSE offers all such data through various data feeds, end-of-day reports, and data software products. For example, a trader willing to backtest his newly developed high-frequency trading algorithm would need an NYSE data feed. A researcher checking the past performance of an NYSE-listed stock when it declared a dividend, on the other hand, would like to check the historical data.
Full information regarding NYSE data services and data products pricing can be found here.
Revenue
The NYSE was acquired by the ICE on Nov. 13, 2013. Since then, NYSE-specific revenue data are unavailable, as ICE annual reports now consolidate all data across multiple exchanges of the ICE Group.
The exchange regularly posted healthy revenue numbers from different streams of business. These include the following revenue streams:
- Trading Software and Technology: The NYSE offers its technology services and trading software to large institutional clients like mutual funds and asset management companies. These types of businesses require faster data and faster trade execution through dedicated products and services, which are offered by the NYSE trading software and technology product suite. This also includes co-location, where the computers of a large trading firm are placed and managed by the NYSE on NYSE premises, offering dedicated services with close proximity to the marketplace for faster trade execution and access.
- Registration and Regulatory Fees: NYSE market participants, market makersand brokers need to register and pay the registration and regulatory fee for their NYSE membership. The NYSE also charges for facilitating trading licenses. All such charges include the one-time registration fee and recurring annual charges.
- NYSE Governance Services: The NYSE also offers corporate governance, riskand compliance services to its diversified customer base. The NYSE’s price list depends on the types of transactions and the securities involved.
Although we can’t get information about the exchange’s revenue stream, we can use the table below to get an idea of what it’s like. It highlights revenue between 2009 and 2012 (the year before the acquisition).
| NYSE Revenue 2009 to 2012 (Years Ending Dec. 31) | ||||
|---|---|---|---|---|
| 2012 | 2011 | 2010 | 2009 | |
| Statement of Operations Data | ||||
| Revenue | ||||
| Transaction and Clearing Fees | $2,393 | $3,162 | $3,128 | $3,427 |
| Market Data | $348 | $371 | $373 | $403 |
| Listing | $448 | $446 | $422 | $407 |
| Technology Services | $341 | $358 | $318 | $223 |
| Other Revenue | $219 | $215 | $184 | $224 |
| Total Revenue | $3,749 | $4,552 | $4,425 | $4,684 |
Transaction fees constituted 63% of total revenues, with listing fees 12%, market data 9.2%, and the rest coming from technology and other sectors.
What Is the NYSE’s Trading Day Schedule?
The NYSE’s regular trading session runs daily between 9:30 a.m. and 4:00 p.m. ET. There is also an opening trading session, which runs between 4:00 a.m. to 9:30 a.m. ET every day. After-hours trading takes place from 4:00 p.m. to 8:00 p.m. ET. Trading activity takes place Monday to Friday, except for statutory holidays.
Who Owns the NYSE?
The New York Stock Exchange is owned by Intercontinental Exchange Group. Commonly known referred to as ICE, the company completed the acquisition of the exchange on Nov. 13, 2013. It is a public company, whose stock trades on the NYSE under the ticker symbol ICE.
What’s the Difference Between the NYSE and Nasdaq?
The NYSE and Nasdaq are two of the largest stock exchanges in the world. Both are based in the United States. The New York Stock Exchange still has a physical trading floor in addition to its electronic trading platform while the Nasdaq is completely automated. The listing requirements and entry standards for newer companies are more favorable on the Nasdaq than on the NYSE. Another key difference between the two is that the NYSE is an auction market that uses specialists while the Nasdaq is a dealer market with multiple market makers.
The Bottom Line
The business of stock exchanges is apparently a profitable one, as indicated by the healthy historical revenue and income details of leading stock exchanges like the NYSE. To continue its lead as the world’s top stock exchange, the NYSE will need to remain innovative by offering new products and services across its different streams. Investors willing to invest in the stocks of such marketplaces should keep a close eye on market developments and consolidation.