what are the people running around and yelling on the NYSE floor actually doing?

Reilly: what are the people running around and yelling on the NYSE floor actually doing?
Is this a movie cliche to see all those people bustling around and shouting?

Is that really how trades are made? What are all the scraps of paper laying on the floor and clutched in their hands?
that seems like a really disorganized way to do things…who are they yelling to?

Answers and Views:

Answer by liveinmd
No it’s not a cliche, burnout for a trader’s voice is usually a couple of months. They are trying to buy or sell securities

Answer by KC
The stock market is more of an auction market. If your broker wants to buy the stocks at a low price, he/she has to make it known because the price changes by the minute or even half a minute. It’s probable a little more computerized now, but the principle is the same.

Answer by John W
You have to think back to when the concept of trading stocks first arose. There were no computers, no telephones and no electronic signs. Originally, companies would issue stocks to investors that they would invite to invest. Once these investors had shares in the companies, some wanted to sell and some wanted to buy more but the company had already issued what they were going to issue so these investors had to somehow find each other. There was no Craigslist, so they went to an area south of the Manhattan palisade and hung out till they found someone they can trade with. This is very similar to how schoolboys would hang out in the schoolyard to trade baseball cards. This area became known as Wallstreet because of the Palisade. Then they built exchanges which were just big rooms where you could run around to find someone to trade with. They limited how many people could be in the exchange at one time and sold “seats” at the exchange. To maximize the use of these “seats” most of them were owned by brokerage houses that funneled all their trade through their respective man on the floor, the more seats a brokerage house had, the more volume they could handle in trades. The scraps of paper are how they kept track of the trades.

Of course, these days it’s computerized and the buys and sells are all matched by computers but you have to remember that computerized trade is a very recent innovation. For the longest time, they wouldn’t trust something as important as the economy to a computer network.