NYSE 2003 Year-End Review And Statistics

• The NYSE Composite Index (NYA) increased more than 29% in 2003, outperforming both the DJIA and the S&P 500 and reaching its high for the year on Dec. 31, when it closed at 6,464.00. The NYSE Composite was re-launched at the beginning of the year using a revised methodology and a new base value of 5,000; the revised index provides investors with a better performance measure for NYSE-listed companies.
• NYSE average daily volume was 1.4 billion shares, valued at $38.5 billion. Approximately 358.6 billion shares were available for trading at year-end.
• The NYSE's total global market capitalization increased from $13.4 trillion at the end of 2002 to $16.8 trillion at year-end 2003, including $5.8 trillion for 467 non-U.S. companies.
• In 2003, the NYSE once again ranked as the lowest-cost, most efficient exchange in the United States. Execution costs were significantly lower than on Nasdaq in terms of effective spreads, according to an NYSE research paper released in May, an update of the SEC's 2001 "Comparison of Order Executions Across Equity Market Structures." In addition, studies by Elkins/McSherry and Abel/Noser found that stocks traded on the NYSE have tighter spreads, better liquidity and lower volatility than comparable stocks relying on markets that are solely electronic. An NYSE study released in November that examined 39 companies that transferred to the NYSE from Nasdaq found that trading costs and volatility are significantly lower at the NYSE than at Nasdaq. After these companies moved to the NYSE, price volatility was reduced by half, quotes narrowed by more than a third, and execution costs were cut in half. In 2003, the Exchange maintained a market share in its listed stocks during NYSE trading hours of 81.5%, and the Exchange provided the most competitive quotes, creating the National Best Bid and Offer (NBBO), 93% of the time.

• The NYSE added 106 new companies to its list in 2003, bringing the total to 2,760 companies listed on the NYSE. Included in the 90 new domestic listings were 17 Nasdaq-transfers such as Centene Corp. (CNC), NBTY, Inc. (NTY), PacifiCare Health Systems Inc. (PHS), and Regis Corp. (RGS) and six Amex-transfers, including Keane Inc. (KEA).
• The 16 non-U.S. companies that joined the NYSE in 2003 included BHP Billiton plc (BBL), Telkom SA Ltd. (TKG), and Woori Finance Holdings Co., Ltd (WF), bringing the total to 467 non-U.S. companies from 50 countries. Average daily trading volume for non-U.S. NYSE-listed companies increased to 139 million shares, up from 134 million shares in 2002, accounting for approximately 10% of total NYSE volume.
• The NYSE once again garnered the dominant share of the IPO market, with 65 initial public offerings in 2003. Every non-U.S. IPO eligible to list on the NYSE did so, raising $5.8 billion in global proceeds. Notable non-U.S. offerings included China Life Insurance Company (LFC), the world's largest IPO in 2003, which raised $3 billion in total global proceeds, and Axis Capital Holdings Ltd. (AXS), which raised $473 million. Domestic IPOs at the NYSE (including funds) raised $29.1 billion in proceeds including American Financial Realty Trust (AFR), Citadel Broadcasting Corp. (CDL) and International Steel Group (ISG) as well as Maguire Properties, Inc. (MPG).
• Two exchange-traded funds listed on the NYSE in 2003: the iShares Dow Jones Select Dividend Index Fund (DVY), the only ETF investing solely in dividend-yielding investments, and the iShares Lehman TIPS Bond Fund (TIP), designed to track the performance of the U.S. Treasury Inflation Notes Index.

The Exchange continued to innovate to bring customers closer to the point-of-sale, and more than 99% of the NYSE's order flow is delivered electronically. The NYSE accomplished several milestones in 2003 upgrading its technology infrastructure, while further expanding its Network NYSE® family of order-execution services and market-information products. Highlights include:

• Doubled systems capacity from 3,000 messages per second to 6,000 messages per second, in preparation for a 100% annual growth rate in customer message traffic. The capacity increase ensures that all customer orders are delivered to the point of sale without delay, even during peak demand.
• Reduced the delivery time for round-trip automated executions on NYSE Direct+ to 0.8 seconds, from 2.7 seconds, a 60% improvement in speed of delivery.
• Introduced a new generation of NYSE e-Broker® hand-held devices, adding several improvements such as enhanced usability for reporting trade executions across multiple orders. Hand-held activity on the NYSE trading floor once again rose sharply during the year, nearly tripling from year-end 2002.
• Implemented "auto-quoting" for all NYSE-listed stocks, resulting in tighter spreads, more timely quotes and the elimination of 10 million keystrokes per day.
• Reduced the NYSE OpenBook™ update cycle by 50%, from every 10 seconds to every five seconds, enabling customers to make better trading decisions.
• New products and services introduced included NYSE Broker VolumeSM Web and NYSE LiquidityQuoteSM.
• The use of Institutional Xpress® rose sharply with significant increases in both orders and executions, particularly in the third and fourth quarters of 2003.
• Implemented systems software at the point-of-sale to ensure that DOT orders systemically have priority over specialist participation.
• Converted nearly all order traffic (98%) to TCP/IP protocol, vastly improving the resiliency of connectivity to the NYSE. In addition, the Exchange, together with SIAC, launched eight nodes of the Secure Financial Transaction Interface (SFTI) network, providing NYSE users with multiple contingency options. The contingency trading floor also was successfully tested on a quarterly basis. In addition, the NYSE managed the August 14 region-wide power blackout without any interruption to trading. The NYSE market place was available for trading 100% of the time, with no system-wide trading related issues for the second consecutive year.

• The NYSE Division of Enforcement prosecuted 231cases in 2003, including 59 actions against member firms, exceeding the record of 35 actions against member firms in 2002, and 172 against individuals. The NYSE collected a record $12.6 million in disciplinary fines, representing a collection rate of 100%.
• Following referrals by the NYSE's Market Surveillance Division in 2003, the SEC instituted six enforcement actions for insider trading against nine individuals and firms, resulting in asset freezes, fines and penalties totaling $5 million.
• Significant enforcement actions in 2003 included:
  • The global settlement between regulators and 10 of the nation's top investment firms involving research analysts' conflicts of interest. In related actions, the NYSE, SEC and NASD permanently barred and fined Jack Grubman, formerly of Salomon Smith Barney, and Henry Blodget, formerly of Merrill Lynch;
  • SG Cowen and Lehman Brothers settled enforcement actions with the SEC and NYSE for supervisory failures in the Frank Gruttadauria case;
  • Citigroup Global Markets Inc. was disciplined for supervisory violations in its role as primary service provider for the employee stock-option plan of WorldCom, Inc.

• On Sept. 21, the NYSE Board of Directors named John S. Reed interim chairman and chief executive officer. Mr. Reed joined the Exchange on Sept. 30. On Nov. 5, the NYSE proposed far-reaching changes to the Exchange's governance to ensure greater transparency and independence of NYSE board members. In mid-November, NYSE members voted overwhelmingly in favor of the proposal, which was approved by the SEC in December. The new structure includes an independent Board of Directors to supervise regulation, governance, compensation and internal controls. The Board of Directors appoints a Board of Executives composed of constituent representatives to discuss NYSE marketplace operations, membership issues, listed-company issues and public issues relating to market structure and performance. The Board of Directors will appoint a Chief Regulatory Officer who will report to its Regulatory Oversight Committee.
• On Dec. 18, the NYSE Board of Directors appointed John A. Thain chief executive officer and a member of the Board of Directors effective Jan. 15, 2004. Mr. Thain has been president and chief operating officer of Goldman Sachs Group, Inc. since July 2003 and was previously president and co-chief operating officer; he has been a director of Goldman Sachs since 1998.
• The NYSE's new corporate governance standards for listed companies were approved by the SEC in early November. The new standards tighten the definition of director independence and require that boards of NYSE-listed companies have a majority of independent directors and that nomination, compensation and audit committees consist solely of independent directors. On June 30, the SEC separately approved the NYSE corporate governance proposal requiring shareholder approval of equity compensation plans.
• On Oct. 30, the SEC approved the NYSE Board of Directors' proposal to eliminate NYSE Rule 500, which regulates voluntary de-listings. Other significant rule filings in 2003: the amendment of Rule 36 to permit brokers on the Exchange floor to communicate from the point of sale with their customers off the floor via cellular telephone during market hours, and the introduction of Crossing Sessions III and IV, two additional after-hours electronic sessions which were approved by the SEC on Dec. 1.

The NYSE will be closed on the following days in 2004; New Year's Day, Jan. 1; Martin Luther King, Jr. Day, Jan. 19; Washington's Birthday, Feb. 16; Good Friday, April 9; Memorial Day, May 31; Independence Day, July 5; Labor Day, Sept. 6; Thanksgiving Day, Nov. 25; Christmas Eve, Dec. 24.