How did Stock Brokers execute a trade on the New York Stock Exchange in the 1980s?

All transactions on the New York Stock Exchange take place in one of three rooms, which are known collectively as “the floor,” at 11 Wall Street in New York.

The largest of the rooms, built in 1903, contains twelve numbered U shaped booths or “posts.” Adjacent to this room is “the garage,” built in 1911, with Posts 13 to 17; and next to that is the Blue Room, which was built in 1968 and contains Posts 18 to 22.

Each post handles the stock of anywhere from 1 to 100 different companies. There are 1,550 companies listed on the New York Stock Exchange, and 1,366 members participate in the trading.

Let’s say you’re in Chicago and you’ve decided to try your luck on the stock market. Perhaps you want to buy 100 shares of U.S. Steel.

First, you call your broker in Chicago and place the order. Your broker calls your order into his company’s telephone clerk, who sits in one of the many telephone booths on the edge of the Exchange floor. The telephone clerk must notify the firm’s broker on the floor.

Each floor broker has a number. The telephone clerk pushes a button which flashes the number of the broker he wants on large, 2,000 square foot annunciator boards which hang on a wall in each of the trading rooms. The floor broker sees his number flashed, goes to the telephone booth, and picks up the order.

He then proceeds to Post 2, where U.S. Steel’s stock is handled. An indicator board at the post tells him at what price, in dollars and eighths of a dollar, the last deal was made. There the broker also sees a “crowd”, a group of other brokers and specialists who are watching U.S. Steel closely.

A specialist is a member of the Exchange who coordinates the buying and selling of specific stocks, keeping track of all current bids to buy and offers to sell. Your broker approaches the crowd and asks for a quotation. “How’s Steel?” he might ask, meaning “What is the highest bid on the floor right now to buy U.S. Steel and what is the lowest offer to sell?”

The specialist may give him a quotation of “25 to 1/4,” which means that the best bid he has received to buy U.S. Steel is $25.00 and the lowest offer to sell is $25.25. Your broker now knows that he must at least top $25.00, so he can’t bid lower than that. He bids 251/4, $25.125.

“Twenty five and one eighth for one hundred,” he says, hoping another broker in the crowd will want to sell 100 shares at 251/4. If he receives no response for his bid, he must bid higher and meet the previous asking price. He then bids 251/4, which was the specialist’s quotation. If there is more than one bid at 251/4, the specialist must decide, on the basis of priority (which bid was entered first) and size of order, which broker gets the stock.

Let’s say the specialist is holding 200 shares of U.S. Steel and the first bid of 251/4 is for 200 shares. The first bid wins. If, however, the first bid is for 100 shares and then your broker enters his bid for 100 shares, the specialist divides his 200 shares between the two brokers. When bids are entered simultaneously, the larger ordinarily has priority. If simultaneous bids are equal in size, there is a “match”, a coin is flipped and the winner gets the stock.

More often, however, deals are transacted between two brokers. When your broker approaches the post to buy, it is more than likely that another broker in the crowd is trying to sell. They seek each other out and negotiate a deal. The market operates as a double auction; prices are not set by the Exchange, but by the process of bidding and offering.

No matter how a deal is arranged, a “reporter” is always on hand to watch. He records the sale on a computer card and passes the card through one of the electronic scanners set up on the floor.

Within seconds the deal is recorded on ticker tape and on thousands of film projecters and Quotron machines throughout the world wherever New York Stock Exchange activity is followed. Until fairly recently, the reporter would place the order in a small plastic container, a “widget,” and send it along tubing that underlies the Exchange floor to a central reporting office. There are more than 40 miles of tubing running through the Exchange.

Finally, the floor broker goes back to the telephone clerk, who sends the results of the deal to the Chicago office where you placed your order. A bill confirming details of the trade is sent to you, and you have five business days from the date of the transaction to pay for the purchase.