What Is the NYSE Arca?

The NYSE Arca Explained in Less Than 4 Minutes

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The NYSE Arca is a securities exchange business that enables professional trading. The exchange is well-known for its numerous exchange-traded products (ETPs).

Learn more about how the NYSE Arca works and find out what it means for individual investors

Definition and Examples of the NYSE Arca

The NYSE Arca is an exchange where certain broker-dealers can trade securities. It’s similar to how a trader might buy and sell stocks listed on the regular NYSE or Nasdaq, but it stands out for facilitating trades in securities like exchange-traded funds (ETFs) and options. Almost 80% of exchange-traded products (e.g. ETFs, exchange-traded notes, and exchange-traded commodities) trade on NYSE Arca, based on assets under management.

The NYSE Arca includes two components—NYSE Arca Equities and NYSE Arca Options. NYSE Arca Equities is an all-electronic exchange that is popular for trading exchange-traded funds (ETFs). NYSE Arca Options includes both an electronic trading platform and a trading floor in San Francisco, where traders can buy and sell options.

How Does the NYSE Arca Work?

The NYSE Arca works by listing securities like ETFs that can be traded on the exchange. Financial services companies that launch these types of funds need to decide where they will be listed, and NYSE Arca is one option they might choose. An exchange like NYSE Arca tries to convince securities providers to list with them by, for example, touting the exchange’s liquidity and overall investor-friendly trading quality.

Some securities listed on NYSE Arca also trade on Nasdaq, which gives traders another choice for where to conduct their transactions. The reasons why a trader might buy or sell a security listed on one exchange like NYSE Arca that also trades on another exchange like Nasdaq can vary, such as if one has a better bid-ask spread or transaction speed. NYSE Arca also provides options like the ability to go dark, meaning the trade isn’t publicly visible to others until executed, which might improve pricing for large transactions.

 Different components of the NYSE Arca exchange previously went by names including the Archipelago Exchange, Arca Ex, and the Pacific Exchange. Following a merger between the New York Stock Exchange (NYSE) and Archipelago Holdings in 2006, the name became NYSE Arca.

U.S.-based broker-dealers (who meet certain requirements like joining a self-regulatory organization [SRO] and having access to a clearing firm) need to become members of the exchange to trade through it. Individual investors have to go through a broker to trade on the NYSE Arca.

If you want to buy a security listed on NYSE Arca, you can submit your order through most brokerage firms or other financial professionals. Even if they don’t have direct access, they can still likely route your order to another party that can trade through NYSE Arca.

What Does the NYSE Arca Mean for Individuals?

For individual investors, the specific exchange used to conduct transactions typically doesn’t make much of a difference. Usually, investors focus more on issues like which ETF aligns with their goals, rather than worrying about small details like if that ETF trades on NYSE Arca or not. Instead, the exchange matters more so to the companies that list securities and to traders.

 It’s possible, however, that decisions like trading on NYSE Arca versus another exchange trickle down to affect individuals in some ways. For example, teachers who are part of large pension funds might benefit from their pension providers working with financial professionals who pay attention to small details around exchange trading. Being able to go dark, for instance, might slightly help a pension fund’s returns when placing a large trade. So, better returns can then help individuals who are part of that pension fund.

That said, these are still relatively minor issues. Individuals, whether investing for themselves or trying to enact change such as within their pension funds, might pay attention more to areas like the balance between risk and return, as well as investment management and brokerage fees, rather than getting too caught up in whether trades take place on NYSE Arca.

Key Takeaways

  • NYSE Arca is a securities exchange that’s known for listing securities like ETFs.
  • NYSE Arca is separate from the traditional New York Stock Exchange, but it’s under the same parent company.
  • Individuals can not trade directly through NYSE Arca; only broker-dealers who become members can.