What is a Seat
A 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, called a floor broker, or for one's own personal account, called 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 (NYSE), but seats on the NYSE no longer exist because the exchange became a for-profit public company in 2006.
BREAKING DOWN Seat
A seat is an expression that came into use with respect to NYSE membership 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 of Seats
The history of the NYSE 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 NYSE 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 then all the way down to $17,000 in 1942. In the late 1970s the NYSE started allowing members to lease their seats to qualified nonmembers. The price of a seat reached its highest point in 2005, selling for $3.575 million.
Ending of the Seat
The NYSE became a public company in 2006, becoming a for-profit organization and ending its private membership structure. With that, the NYSE structure that allowed for seats no longer existed. The 1,366 seat owners received 80,177 shares of the newly public company, plus $300,000 in cash and $70,571 in dividends. 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 2013 for more than $10 billion. With virtually all trading done via computer, the floor of the exchange has became a relic, with only a few remaining traders working on it.