Both the NYSE and the NASDAQ are popular names when it comes to stock markets. The NYSE or the New York Stock Exchange and the NASDAQ or the National Association of Securities Dealers Automated Quotations are based in New York City but offer different options for the buyers and sellers, each offering different ways to trade stocks. The NYSE and the NASDAQ have quite a few similarities; they also have striking differences between the two in terms of fee structure, type of market, mode of trading, prerequisites to be listed on the respective exchanges, etc. which are later discussed in this article. If you are interested in the stock market happenings, then this article is for you; it will explain the fundamental distinction between NYSE and NASDAQ exchange.
NYSE
NYSE or the New York Stock Exchange is the planet’s oldest marketplace for buying and selling stocks and is regulated by the Securities and Exchange Commission. Delving into its past, it came into existence on May 17, 1792, when 24 stockbrokers and merchants from New York City signed an agreement called the Buttonwood Agreement at 68 Wall Street. The Buttonwood Agreement was made based on the European trading systems existing at that time. The Buttonwood Agreement was also believed to be the savior in the times of financial panic that existed in 1792, which spread fear about companies becoming insolvent.
IT is the world’s largest securities trade in terms of market capitalization. It is located on Wall Street in New York City. It is also known by the name “Big Board” and consists of 21 rooms dedicated only for stock trading. Currently, the New York Stock Exchange is open 5 days a week, from Monday to Friday with the opening and the closing bells ringing at 9,30 A.M to 4 P.M ET, marking the opening and closing of trades on each day. The securities market remains closed on every federal holiday, and if sometimes a federal holiday falls on a Saturday, the stock market remains closed on the preceding Friday. Similarly, if a federal holiday falls on a Sunday, the stock market remains closed on Monday.
It formerly operated as a private organization until it became a public entity in 2005. It is now owned by the Intercontinental Exchange, which purchased New York Stock Exchange in the year 2013.
NASDAQ
NASDAQ, or the National Association of Securities for Dealers Automated Quotation, is an electronic exchange that formerly started as an equities exchange based in the US. It allows investors to trade on stocks and securities on an automated and transparent electronic platform. It was established in the year 1971 by the National Association of Securities Details. NASDAQ’s operations at the beginning, were not quite smooth because it was not in a position to execute trades, and so it started with automated quotations only.
Subsequently, over time, it started adding automated trading programs and gave birth to the first online stock trade. It offers over 5000 over the counter stocks for trading. Stocks listed on NASDAQ generally consist of 4 letters except if they are transferred from the NYSE when there would be 3 letters. NASDAQ is the market maker, where traders are not directly executed between the buyers and the sellers but through dealers.
List of differences between NYSE and the NASDAQ Exchanges
1) Working Procedures
How the trades are executed in the New York Stock Exchange, and the NASDAQ, marks a significant difference between the two. It operates as an auction market, and on the other hand, the NASDAQ operates as a dealer market. While trading on the National Association of Securities for Dealers Automated Quotation is automated, the New York Stock Exchange hires human specialists in some places to monitor trade and place them electronically. On the NYSE, trades are placed between the buyers and the sellers directly by matching their bid prices.
On NYSE, the trade can only occur if the bid prices between the buyers and sellers match. On the other hand, trades are placed on the NASDAQ through a dealer and not directly between the buyers and sellers. Stockbrokers call a dealer to enter a trade onto the online execution system, and then the online system matches the prices and places trades effectively.
2) Listing Fees
If companies wish to list their stocks on an exchange, they need to pay a certain amount towards the listing fees. To list stock on the NYSE, the listing fee is around $250,000. However, the annual fees are based on the number of shares listed and are capped at $500,000.
The listing fee on the NASDAQ is around $50,000 to $75,000. Annual fees are usually around $27,500.
3) Listing procedures
The listing procedures on both are different. NYSE listing requirements need the companies to issue a minimum of 1,100,000 shares to at least 400 shareholders, while companies that wish to list their stocks on the NASDAQ need to issue 1,250,000 shares for the public to trade.
Additionally, companies that wish to be listed on the NYSE should issue shares having a market value of at least $40 million to the public with a minimum share price of $4.
4) Reputed companies that are listed on each trade
Companies listed on the NYSE include Wal-Mart, Bank of America, Citigroup, Coca-Cola, and General Electric. On the other hand, companies that are listed on the NASDAQ include Google, Microsoft, Apple, Intel, Facebook, Sun Microsystems, and Kraft Foods.
5) Years of existence
NYSE is a 200 years old exchange founded in 1792 to provide a platform to trade securities. While the majority has been transformed into electronic trading, there is still plenty of trading executed on the trading floor every day.
National Association of Securities for Dealers Automated Quotation is just a 50 years old exchange that came into existence recently in the year 1972. It is the first electronic securities trade where trading is done electronically without any human interference, though it still owns a floor in the MarketSite tower at the center of Times Square in New York City. However, the physical presence of NASDAQ is not so popular as everything is done electronically. On the other hand, where the NYSE is located, Wall Street is considered more iconic because there is still a provision of human traders executing trades.
6) Perceptions
NYSE is considered the perfect stock trade for well-established and stable companies that wish to list their stable stocks on an exchange. While on the other hand, NASDAQ is considered a high-tech exchange for more volatile stocks.
7) Indices
Indices on the NYSE include NYSE Composite and the Dow Jones Industrial Average. Whereas, the induces on the NASDAQ includes NASDAQ-100, NASDAQ Composite, and NASDAQ Biotechnology.
Therefore, even though both NASDAQ and NYSE are reputable securities exchanges, there are a lot of differences in their modes of operations, costs involved, and the types of companies listed on them. NASDAQ is the market maker, while the latter is the auction market. The listing requirements on both the exchanges also are very different. Though it does not affect trading in any way whatsoever, it is equally important to know how each of these two exchanges operates.
As an investor, you should always be aware that a particular company is likely to be listed (NASDAQ vs NYSE), in which you want to invest. If you are looking for investing in more technology-oriented companies that have come up only very recently and have comparatively lesser capital investment, then the companies are likely to be listed on the NASDAQ. On the other hand, if you are looking to invest in companies that have been operating steadily for a long time and have huge capital investment, they will most likely be listed on the NYSE. Thus, the confusion NASDAQ vs NYSE is clarified.
FAQs
1) Is NYSE better than NASDAQ?
In the comparison of NASDAQ vs NYSE, when it comes to market capitalization, NYSE is considered as the largest stock exchange of the world, but when measured in terms of turnover, NASDAQ outpaces NYSE. Moreover, NYSE is the oldest stock exchange, but NASDAQ is the fastest-growing electronically enabled stock exchange of the world. Therefore, both the NASDAQ and NYSE are equally competitive as far as buying and selling of securities are concerned. NASDAQ is the market maker, and NYSE operates as an auction market.
2) Is Apple listed on NYSE or NASDAQ?
Apple is listed on the NASDAQ- the market maker.
3) What is the difference between different stock exchanges?
Both NASDAQ and NYSE are leading securities exchanges in the world to buy and sell securities, but there are some basic differences between them. They differ in certain areas of operations, like listing procedures, listing fees, perceptions, etc.
