Auction Exchanges

TheAMEXand NYSE are both primarily auction-based, which means specialists are physically present on the exchanges’ trading floors. Each specialist "specializes" in a particular stock, buying and selling the stock in a verbal auction. These specialists are under competitive threat by electronic-only exchanges that claim to be more efficient (that is, execute faster trades and exhibit smaller bid-ask spreads) by eliminating human intermediaries. The NYSE is the largest and most prestigious exchange. Collectively, as of December 31, 2007, its listed companies represent about $30.5 trillion in market capitalization. Listing on the NYSE affords companies great credibility because they must meet initial listing requirements and also comply annually with maintenance requirements. For example, to remain listed, NYSE companies must keep their price above $1 and their market capitalization (number of shares x price) above $50 million. Furthermore, investors trading on the NYSE benefit from a set of minimum protections. Among several of the requirements that the NYSE has enacted, the following two are especially significant:
Companies must get shareholder approval for any equity incentive plan (for example, stock option plan or restricted stock plan). In the past, companies were allowed to sidestep shareholder approval if an equity incentive plan met certain criteria; this, however, prevented shareholders from knowing how many stock options were available for future grant.
A majority of the members of the board of directors must be independent. However, each company has some discretion over the definition of "independent", which has caused controversy. Furthermore, the compensation committee must be entirely composed of independent directors, and the audit committee must