The best known stock exchanges are the New York Stock Exchange and the American Stock Exchange. Besides these two national exchanges, there are many smaller regional stock exchanges, such as the Pacific in Los Angeles, the Philadelphia, the Boston, the Cincinnati, and the Chicago. Some small companies are listed only on a regional exchange, while some NYSE and AMEX companies are listed on these smaller exchanges, as well, to help trades happen faster and cheaper for investors. When most people think of a stock exchange, they picture a scene of frantic activity, with traders in funny-looking jackets simultaneously jostling for position, shouting commands, making strange hand signals, and writing up orders. Behind this frenzied spectacle, however, is a methodical and organized system of trading, in which the price of any stock is set purely by rule of supply and demand in an auction setting.
Specialists help match buyers and sellers, but shares are always sold to the highest bidder.
From the perspective of an investor, buying and selling stocks seems pretty simple. Within a few minutes, you'll receive a confirmation that your order has been completed, and you'll be the proud new owner of Coca-Cola's stock. Behind the scenes, however, there's a lot of action that takes place between your order and the confirmation. The broker sends the order to the firm's order department. The clerk gives the order to the firm's floor trader, who also works on the exchange floor.