How Exchanges Operate

If you want to buy or sell securities, you cannot just pick up your phone and call an NYSE Euronext exchange. You must use a broker. Your broker can place your order, in forwarding it to a NYSE Euronext’s member.  These members typically are brokers or banks authorized by NYSE Euronext for trading on its markets. Therefore they get an access to the electronic trading system and can execute orders for investors.

A full electronic market- NYSE Euronext’s stock markets are indeed working accordingly to a full electronic market model. When a customer places an order to buy or to sell an equity, this order is being executed by computerized means: from bid and ask matching to discovery of the equity’s price up to post-trade and settlement-delivery operations.

In the past, brokers used to meet together at the stock-market’s floor and matched their customer’s orders by open outcry. Market’s specialists nowadays work in front of computers’ screens and are permanently linked together by electronic impulses throughout the trading day.

The NYSE Euronext’s market architecture lies on four working together systems:

  • The automatic order’s routing system handles investors’ orders to the listing central system, via an orders’ collector and a trader, whatever could be the placement’s way ( at the counter, by phone, fax or internet);
  • The listing central system operates the orders’ automatic execution;
  • The real-time information dissemination system, which is being fed by the listing system;
  • The securities settlement/delivery system operates between intermediaries, via a single clearinghouse, which also is being fed by the listing system. As first role, the clearinghouse operates as a central counterpart, coming between buyers and sellers and providing them guarantees on successful conclusions of their operations.
  • The centralized order book works as a keystone of the trading system. Appearing as a data’s serial displayed on a computer’s screen, it can be accessed by all NYSE Euronext’s members. They are therefore being permanently informed about the number of a company’s shares currently sold or bought. Part of these figures and news included in the order book is also furnished to individual investors, via companies specialized in disseminating market information – they are called “quote vendors”.

Investors wanting to track market prices in real time may get a subscription to one of these companies; they will more particularly get news about trade volumes and up-to-date real market prices.

 

How securities are being traded

All NYSE Euronext European cash markets are linked together by a single trading platform. All securities listed in cash markets are traded accordingly to the same rules. Companies are divided into one of two groups – auction or continuous quotation – depending on liquidity. Those with sufficient natural liquidity, defined as more than 2,500 trades per year, are automatically quoted on a continuous basis.  While those with lower liquidity are traded by auction; auctions are organized twice daily, at 11:30 A.M. (CET) and at 4:00 P.M. (CET), helping to focus liquidity at specific points in time. Matching of orders in the Free Market (which includes company’s shares traded outside of the regulated markets) is being held once a day, at 3:00 P.M. (CET).