as of December 31, 2004
NYSE 2004 Year-In-Review: New York Composite Index (NYA) Ends 2004 Up 12.6%
- The New York Composite Index (NYA) ended 2004 up 12.6% at 7,250.06, outperforming the Dow Jones Industrial Average (DJIA), which increased by 3.1% to 10,783.01 in 2004. The NYA outperformed most major U.S. stock indexes, including the S&P 500, which increased by 9.0% to 1,211.94, and the Nasdaq Composite Index, which increased by 8.6% to 2,175.44.
- Average daily volume reached 1.46 billion shares, a new record from the previous high of 1.44 billion shares in 2002, and up from 1.40 billion shares in 2003. On Dec. 17, the NYSE had its second-most active day, with daily volume of 2.69 billion shares. Total volume for 2004 also reached a new record, at 367 billion shares, up 4 billion shares from the previous record of 363 billion shares in 2002.
- The total global market value of NYSE-listed companies reached $20.0 trillion, including $7.1 trillion for non-U.S. companies, up from a total of $17.3 trillion in 2003. Average daily trading volume for non-U.S. NYSE-listed companies increased to 153 million shares, up from 138 million shares in 2003, accounting for about 10.5% of total NYSE volume.
The Highest Quality and Most Competitive Market
- Throughout 2004, the NYSE was the most competitive venue for trading its listed stocks, providing investors efficient price discovery, the lowest execution costs, the deepest liquidity, the tightest spreads and best prices.
- Throughout 2004, the NYSE provided the most competitive quotes in its listed stocks, creating the National Best Bid and Offer more than 89% of the time.
Source: Consolidated Quote file and NYSE Research
Trade execution costs for NYSE-listed stocks were the lowest of any U.S. market throughout 2004, according to research by Abel/Noser, Elkins/McSherry and Plexus, third-party research providers who track execution costs quarterly.
*Abel/Noser Corp. Q3 2003 - Q2 2004 Elkins/McSherry Global Universe Q2 2003 - Q1 2004 Plexus Group Q2 2003 - Q1 2004
- The NYSE was the most liquid market, providing the deepest pool of liquidity and offering the largest number of shares at the best-quoted prices. The average dollar value available for trading at the best price on the Exchange in 2004 was $29,849, compared to $9,436 for Nasdaq listed stocks traded on Nasdaq.
- The NYSE’s execution certainty was among the highest of any major U.S. market in 2004, according to 11Ac1-5 data filed with the SEC; the NYSE executed 99% of market orders it received. While other market centers promised speedy executions, their lack of liquidity resulted low fill rates, less execution certainty and higher cancellation rates.
The NYSE’s market share in its listed stocks during NYSE trading hours improved to 80.4% in December, from 77.1% in January.
NYSE Governance and Leadership
- John A. Thain joined as CEO on Jan. 15 and immediately launched initiatives to increase responsiveness to the NYSE’s customers, address the NYSE’s competitive position and market structure issues, initiate work on the hybrid market, and enhance the transparency and efficiency of the Exchange’s financial processes.
- Separating the NYSE’s marketplace from its regulatory function, on March 8, Richard G. Ketchum was appointed the NYSE’s first Chief Regulatory Officer, reporting to the Board of Directors’ Regulatory Oversight Committee. Susan L. Merrill was appointed executive vice president of Enforcement; Grace Vogel was appointed executive vice president of Member Firm Regulation and Robert A. Marchman was named senior vice president and head of Market Surveillance. Organizational changes included moving Listed Company Compliance from the business side to Regulation, and integrating the NYSE’s domestic and international client service and new business teams into a single Global Corporate Client Group, headed by executive vice president Noreen M. Culhane.
- Additions to the NYSE’s management team included: Amy S. Butte, appointed executive vice president and Chief Financial Officer; Peter W. Jenkins, senior vice president, Institutional Client Group, and Margaret Tutwiler, Executive Vice President, Communications and Government Relations. In August, the Board of Directors elected Edgar S. Woolard, the retired chairman of DuPont, to fill the seat vacated by D. Euan Baird, who resigned in April. The NYSE continues to screen candidates for board membership received in response to the Exchange’s public solicitation for nominations, the first time that the Exchange sought public input for board nominations.
- The Exchange successfully implemented a series of reforms to meet or exceed the enhanced governance, transparency and reporting standards required of its listed companies, including: new governance and leadership, an independent board of directors, a two-board structure, independent regulation, and unprecedented disclosure of financial information.
The NYSE announced plans to launch thehybrid market, a blend of the auction market and auto-execution, the first of its kind for trading equities securities and an important change in the way stocks will be traded at the Exchange. Limits will be eliminated on the size, timing and types of orders that can currently be submitted via the NYSE Direct+™ automatic execution service, and new features will be incorporated, giving customers a greater ability to trade electronically, with speed, certainty and anonymity. Interaction of the electronic and floor markets in the hybrid model will maintain the opportunity for price improvement, ensuring that the NYSE continues to provide the lowest execution costs, deepest liquidity, tightest spreads and best prices in its listed stocks. In 2004, the NYSE made several rule filings related to this initiative; the initial filing in February, replaced in August, and a supplemental filing on Nov. 9.
- Substantial components of the NYSE’s hybrid market were delivered in parallel with detailed specifications of the evolving new market structure.
- Further enhancements to NYSE Direct+ were built that will provide institutional traders with automatic execution service for short sales and other special order types, when enabled.
- The delivery time for automated executions on NYSE Direct+ was further reduced, to a 0.6 second turnaround time through all NYSE systems.
- New e-Broker® wireless handheld technology was developed to lay the foundation for floor professionals’ full electronic participation in the hybrid market. New features include a new wireless network with 50 times more capacity and a new hand-held device with software that provides the capability to layer the book with interest at multiple price points.
- NYSE Open Book Real-Time™ was developed to provide a vital information tool in the hybrid market and NYSE Open Book™ was added to floor brokers’ hand-held devices.
- New technology, introduced successfully in the ETF market, was built to allow NYSE specialists to react more quickly by electronically publishing quotations, an important component of the hybrid market.
In November, NYSE Direct+ volume was 143,790,505 million shares, or 10% of overall NYSE volume, from 6% at the end of 2003. NYSE Direct+ volume now constitutes more than the combined volume of all electronic communications networks (ECNS) in NYSE-listed stocks.
In other technology developments throughout 2004:
- NYSE systems capacity expanded from 6,000 to 8,000 messages per second, in preparation for further growth in customer message traffic.
- Floor brokers pervasively adopted wireless handheld technology, with about 800 daily wireless users on the NYSE trading floor, eliminating the need to support paper interactions in the hybrid market.
- The NYSE’s business continuity plan was enhanced, with all “post-9/11” improvements in network resilience completed, including a remote staffed network operations center located outside New York City. During Congressional hearings in September, the NYSE received high marks for its level of preparedness and ability to respond to a crisis.
- The NYSE market place was available for trading 100% of the time, for the third straight year; in a year that included 741 new software releases and 1,142 hardware changes.
- The NYSE website, nyse.com was rebuilt with a new design, search engine and more content.
Listings and New Products
- The NYSE garnered 90% of qualified domestic IPO proceeds, with 69 initial public offerings in 2004 raising $24.4 billion. The majority of non-U.S. IPOs eligible to list on the NYSE also did so, raising $6.75 billion in global proceeds. Non-U.S. offerings included Semiconductor Manufacturing International Corporation (SMI), China Netcom Group Corp. Limited (CN) and L.G. Phillips LCD Co., Ltd. (LPL). Domestic IPOs (including funds) raised $45.0 billion in proceeds, including Genworth Financial, Inc. (GNW), salesforce.com, Inc. (CRM), Domino’s Pizza Inc. (DPZ), DreamWorks Animation SKG, Inc. (DWA), Build-a-Bear Workshop, Inc. (BBW) and Freescale Semiconductor, Inc. (FSL).
- The 20 non-U.S. companies that joined the NYSE in 2004 included Brazil’s GOL Linhas Aereas Inteligentes S.A. (GOL), Hong Kong’s Hutchison Telecommunications International Ltd (HTX), and Tata Motors Limited (TTM) from India and Signet Group plc (SIG) from the UK, which transferred from Nasdaq, bringing the total to 455 non-U.S. companies from 47 countries.
- The NYSE added 152 new companies to its list in 2004, up more than 40% from 106 in 2003, and bringing the total to some 2,765. Included in the new domestic listings were eight Nasdaq transfers, including New Century Financial Corp. (NEW), and eight Amex transfers, including Devon Energy Corp. (DVN) and three OTC transfers, including Laidlaw International Inc. (LI)
- The NYSE listed 13 Exchange Traded Funds (ETFs), derivatives, or structured products in 2004. Notable new products included the FTSE/Xinhua China 25 Index Fund, the iShares Dow Jones Select Dividend Fund and the streetTRACKS® Gold Shares Trust. One week after listing, the Gold Shares Trust had amassed assets exceeding $1.5 billion, with 30 million shares traded, a record for any derivative, ETF or structured product on the NYSE. Other introductions included the iShares NYSE Composite (NYC) and the iShares NYSE U.S. 100 (NY) Index Funds, the first tradable products based on NYSE indexes.
- The NYSE division of Enforcement completed 195 cases in 2004, and imposed $25.6 million in disciplinary fines, more than double the $12.6 million in fines imposed last year. This excludes joint enforcement actions that were settled for a total of $400 million against: seven specialist firms for breaching their duty as agent to public customer orders; two additional investment banking firms regarding conflicts of interest between research and investment banking; and one member firm concerning revenue-sharing payments it received.
- As a result of referrals from Market Surveillance, the SEC initiated six actions involving 21 individuals totaling $4 million in profit disgorgements, fines and penalties.
- The NYSE’s Member Firm Regulation division conducted 469 examinations and processed 346 complaints and 153 inquiries from customers, while adopting a more risk-based approach to conducting examinations. Nineteen information memos for rule and interpretive standards were issued, including guidance on research analyst rules, supervision and internal controls, business continuity and contingency plans, supervision and proxies.
- NYSE Regulation created an additional 65 regulatory positions, expanding to a total of 700 staff.
- New regulatory technology was implemented for better controls and accountability. DOT priority, for example, was implemented to strengthen Regulation’s ability to detect and investigate activity that may violate the Exchange’s rules or Federal securities laws.
- Twelve new NYSE rules, or amendments to current rules, were approved by the SEC in 2004. Among significant rules and rule changes in 2004, the SEC approved an amendment of an NYSE rule that provides its listed companies greater flexibility to change the specialist unit that trades its stock at the NYSE. This amendment makes it easer for listed issuers to change specialist firm for “non-regulatory reasons,” after the appropriate process with the NYSE’s Quality of Markets Committee.
Contact: Christiaan Brakman