THE price of a seat on the New York Stock Exchange has plummeted to its lowest for eight years as fears mount over the future of the world’s leading share trading market.
One of the Big Board’s 1,366 member seats changed hands for only $1.15 million (£641,000) on Friday night, $100,000 less than the previous sale on August 17.
The last time a seat sold for less than $1.2 million was in 1996, when one traded for $1.05 million.
At the peak of the stock market’s technology bubble in 1999 seats would regularly be bought and sold for more than $2.6 million.
A seat on the NYSE is equivalent to a single share in the not-for-profit organisation, which is similar in structure to a mutual society.
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Member firms must own a seat to conduct business on the exchange and most firms own several seats. But many of the seats used by the brokers and banks that dominate the market are rented from individuals who have either bought them as investments or inherited them from retired or deceased NYSE traders.
The market for seat rentals is a good indicator of the NYSE’s health as it gives a clue about the amount of actual trading activity on the exchange floor. Traders often joke that the lifestyle of wealthy widows living on Manhattan’s affluent upper east side depends upon the rental income from exchange seats inherited from their deceased husbands.
In the late 1990s a seat could be leased for more than $350,000. Today they are being rented out for just $115,000 and experts believe the price is still falling. The fall in rents is encouraging more owners to sell seats, depressing the market and forcing the price still lower.
Softness in the equities market is partly to blame for the tumbling value of an NYSE seat, coupled with a number of setbacks since Dick Grasso, its former chief executive, was forced to resign over his $200 million pay package.
John Thain, the new incumbent, recently proposed a so-called hybrid trading system for the NYSE, which would see more computerised trading in addition to the 212-year-old open outcry system.
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Francis and Theresa Maglio, who used to run their own brokerage at the NYSE but are now retired, still own one seat as an investment.
Mr Maglio became an NYSE member in 1973 and started his own firm in 1982. In 2002 he sold the firm, which had a total of four seats, to the Bank of New York. He believes that the price of a seat could fall further still in the coming months. “I could see a seat dropping to $700,000 or $800,000 before it turns around,” he said.