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 their own personal account, called a floor trader.
In the finance industry, owning a seat on an exchange was long considered a prestigious position, open only to a lucky and wealthy few. Historically, the term 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.
Seats are no longer used on the NYSE; the stock exchange became a for-profit public company in 2006.
Understanding Seats: A Brief History
A seat is an expression that came into use with respect to NYSE membership. 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, the term ceased to have the literal meaning of a chair from which to trade.
At its peak, the price of a seat on the NYSE reached $3.575 million in 2005.
The history of the NYSE dates back to 1792 when 24 businessmen signed the Buttonwood Agreement under a tree on Wall Street in Manhattan. The men 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.
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 stock market crash. The price fell to $68,000 in 1932 and then to $17,000 in 1942. In the late 1970s, the NYSE began 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.
- The term seat is a reference to a seat on a stock exchange from which a person can trade.
- Historically, owning a seat was possible only for the wealthy.
- The term seat was most commonly used in the context of the NYSE.
- Seats ceased to exist on the NYSE in 2006 when the exchange became a for-profit public company.
The Ending of Seats
The NYSE became a public company in 2006 and became a for-profit organization and ended its private membership structure. At that time, the NYSE structure that allowed for seats changed. The 1,366 seat owners received 80,177 shares of the newly public company, plus $300,000 in cash and $70,571 in dividends.
At that point, 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. The 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 become a relic, with only a few remaining traders working on the exchange floor.