What Is the Difference Between the NYSE and NASDAQ?

The New York Stock Exchange (NYSE) is the largest securities exchange in the world. There are many smaller trading centers around the world, namely Toronto, London and Tokyo on the world market, and Chicago, Boston, Philadelphia and Pacific coast in the US. The NASDAQ doesn’t have a fixed location physically. The NASDAQ trades securities on a telecommunications network.

The two securities trading systems are similar in composition, yet different. The NASDAQ is comprised mainly of hi-tech and electronics companies. These companies are seen as more volatile and positioned for growth. The general cost and entry fee of listing a company on the NASDAQ are considerably different, with the NYSE sharing a much higher price.

The NYSE is an older system and consists of companies that are older and well established. Many of them are often referred to as blue-chip stocks. These stocks are often considered as better established and more stable than stocks on the NASDAQ. Prior to 2006, the NYSE was owned privately while the NASDAQ was a publically traded company. During 2006, a change occurred within the NYSE that switched ownership and it became a publically traded entity as well. Now both systems are required to obey the rules and laws of the Securities and Exchange Commission (SEC). Prior to 2006, the NYSE was a not-for-profit organization. It had been a for-profit entity for the past 216 years. To stay competitive with the NYSE, the NASDAQ merged with the American Stock Exchange in 1998. Both of these entities are now referred to as the NASDAQ. The NASDAQ is a self-governing body with no members per se. While there are no members, all trading must be made through one of the 400 market makers. The NASDAQ also grants licenses to brokers and oversees trading practices. While many aspects of the two markets are similar, there are considerable differences between them. Both trade securities but one deals with high growth potential and hi-tech markets while the other are more traditional blue-chip companies that have been in business for almost a century. There trading styles are completely different, one by auction and the other trading through specific brokers. Companies have a choice of which exchange to be listed on for public trading but the cost of becoming listed are markedly different.

Definition of the NYSE

The NYSE is located on Wall St. in New York City. The trading floor is housed in a building owned by the Exchange. Buyers and sellers of securities trade securities on the central floor. The NYSE is an auction based trading house. Buyers and sellers negotiate on purchase price through an auction system where prices are named with volumes available and sellers may choose from among the buyers who are willing to purchase their securities.  The NYSE has over 2700 securities available to be bought and sold. The NYSE represents more than 25 trillion dollars of combined capitalization. The exchange is open all normal working days from 9:30 AM to 4 PM EST. There are 1366 members that have the right to exchange securities on the floor of the exchange. These members are said to have seats on the exchange. The trading of securities on the exchange is governed by a body of elected members. There are a total of 1366 seats on the exchange that can be bought and sold as well.

Definition of the NASDAQ

The NASDAQ operates on a different type of buy/sell system and doesn’t involve direct interaction between buyers and sellers. A dealer facilitates the buying and selling. There are 400 dealers or “market makers” authorized to broker securities on the exchange. In terms of daily volume of shares traded, the NASDAQ is the largest securities exchange in the world. The NASDAQ is a dealer’s market as opposed to the auction market represented by the NYSE. The Dealer has the ability to create or stimulate a market by purchasing some of the stock being offered and representing it to its own investors. This will often stimulate the movement of shares and encourage trading. There are about 3200 securities available to the investors on the NASDAQ.