The Correct Answer and Explanation is:
Correct Answer: False
The assertion that most stock exchanges today use floor trading with human brokers is inaccurate. The global financial landscape has undergone a dramatic transformation over the past few decades, shifting decisively away from physical trading floors and toward electronic systems.
In the past, stock exchanges were defined by their trading floors, vibrant physical spaces where brokers engaged in an “open outcry” system. They would shout and use hand signals to execute buy and sell orders on behalf of their clients. This method, while iconic, was relatively slow, less efficient, and had higher transaction costs due to the need for human intermediaries.
Today, the overwhelming majority of trading volume is handled through sophisticated electronic communication networks (ECNs). On these platforms, orders are entered into a computerized system and are matched automatically by algorithms. This process is incredibly fast, with trades being executed in fractions of a second. This technological shift has led to greater efficiency, lower costs, and increased accessibility for investors worldwide. Major exchanges like the Nasdaq have been fully electronic since their inception, and many others around the globe have followed suit.
While some exchanges, most notably the New York Stock Exchange (NYSE), still maintain a physical trading floor, its function has fundamentally changed. It now operates as a hybrid market. The floor is used for the opening and closing auctions and for handling large, complex “high touch” orders that may benefit from a human specialist’s judgment. However, the vast majority of the NYSE’s daily trading volume is executed electronically, without any direct involvement from a floor broker. Therefore, the dominant model for modern stock exchanges is electronic, not floor based.
