DEFINITION of 'Seat'

Seat refers to membership on a stock exchange, which enables a person to trade on the floor of the exchange, either as an agent for someone else, a floor broker, or for one's own personal account, a floor trader. In the industry, owning a seat on an exchange was long considered a prestigious position, open only to a lucky and wealthy few. It was most commonly used to refer to membership on the New York Stock Exchange, in a structure that ceased to exist when it became a publicly traded company.

BREAKING DOWN 'Seat'

Seat is an expression that came into use with respect to membership on the NYSE because each trader or broker was assigned a chair in the hall where trading took place, with each stock individually called to trade. The exchange moved to a system of continuous trading in 1871, as trading boomed in the years following the Civil War, and the term ceased to have the literal meaning of a chair from which to trade.

Background

The history of the New York Stock Exchange dates back to 1792, when 24 businessmen signed the Buttonwood Agreement under a tree on Wall Street in Manhattan, and agreed on basic ground rules for trading stocks. The New York Stock and Exchange Board was formed in 1817. In 1868, the exchange fixed the number of seats at 1,060, which was later increased to 1,100. Also in 1868, a seat became a property that could be bought and sold. Prices were as low as $4,000 at the time. The price of a seat in mid-1929 hit $625,000 shortly before the crash. The price fell to $68,000 in 1932 and to $17,000 in 1942. The price reached a high of $3.25 million in 2005. The rules were again modified in the late 1970s, when members were first allowed to lease their seats to qualified nonmembers.

The End of the Seat

In 2007, trading became entirely electronic, and NYSE merged with Euronext to increase the range of traded products. Members received $500,000 and 77,000 shares in the new, publicly traded company. The concept of a seat ceased to exist, and the right to trade on the exchange required only a one-year license. The license cannot be resold, but ownership of the license can be transferred if the company that owns it is sold. NYSE was bought by the Intercontinental Exchange, known as ICE, in November 2013 for $10.1 billion. With virtually all trading done via computer, the floor of the exchange became a relic, with only a few remaining traders working on it.

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