The differences between the New York Stock Exchange and NASDAQ

The New York Stock Exchange (NYSE) is the largest stock exchange in the world with a combined capitalization of NYSE is $25.0 trillion. Over 2,700 securities are listed in NYSE, which is a physical location exchange with own building, a limited number of members and an elected governing body. Although everybody stands up, members are said to have seats on the exchange. The 1,366 seats, which are bought and sold, give the holder the right to trade on the exchange.

The New York Stock Exchange is a modified auction market, where buyers and sellers trade securities of listed companies. NYSE is open on all normal working days, from 09:30 to 16:00, with the members meeting in a large room equipped with electronic equipment that enables each member to communicate with the firm’s offices throughout the country. Special facilities are offered to institutional investors such as mutual funds and pension funds, so that they can sell large blocks of stock without depressing their prices. In fact, brokerage houses that cater to institutional investors purchase blocks of 10,000 shares of more and resell the stock to other institutions or individuals. In addition, when a firm has a special announcement that is likely to cause a major change in the stock price, the brokerage house asks the exchange to halt stock trading until the announcement is made and evaluated by investors.

The National Association of Securities Dealers Automated Quotation System (NASDAQ) is the largest stock exchange in the world in terms of daily traded volume with 3,200 listed securities. NASDAQ is a self-regulatory body that licences brokers and oversees trading practices. It is not a physical location exchange, but a computerized network, with no members and no governing body.

NASDAQ started as a quotation system, but over time it has grown to become an organized securities market with its own listing requirements and 400 market makers, who market the stock and are responsible for its liquidity. It allows multiple market participants to trade through its Electronic Communication Networks (ECNs) structure, in the pre-market trading hours (7:00 - 9:30), market-hours (9:30 - 16:00) and after hours (16:00 - 20:00).

Not all securities trade through the NASDAQ system. NASDAQ operates the Nasdaq National Market list, where the larger NASDAQ largest stocks are listed (Intel, Microsoft etc), and the Nasdaq SmallCap Market list, where small companies with high growth potential are listed. NASDAQ also operates the OTC Bulletin Board, which lists quotes for stocks registered only at the Securities Exchange Commission (SEC) and not on any exchange. Also, NASDAQ operates the Nasdaq Pink Sheets, for stocks not registered with the SEC.

In order to become more competitive with the NYSE and the international markets, NASDAQ has merged with the American Stock Exchange (AMEX) in 1998 to form an organized investment network. Although this network is still referred to as NASDAQ, securities are traded separately on the two markets.