Differences Between the NYSE and NASDAQ

by | Jun 18, 2014 | Asset Management, Podcasts

It’s often taken for granted by those familiar with the stock market, but plenty of people don’t know the difference between the New York Stock Exchange and the NASDAQ. There are several, key physical and financial differences in these exchanges that everybody should know. Tom and Brendan discuss these differences and more on this week’s Mullooly Asset Management podcast.

You may have heard the NASDAQ referred to as the OTC Market. It’s sometimes called this because it has no real physical location, like the New York Stock Exchange. Until about 1987 it was only called the OTC Market. Currently you’re more likely to hear it called the NASDAQ. What does NASDAQ stand for? It’s the National Association of Dealers Automated Quotations. The association is made up of all the member firms that trade with one another. Each of them has the ability to buy, sell, and post quotes. The NASDAQ, or OTC Market, started in the 1960s trading penny stocks on pink pieces of paper called pink sheets. You had to call in and get prices on most of these names. Today the system works electronically using the small order execution system (or SOES). The shift to electronic trading happened after market makers decided to not answer their phones during the 1987 stock market crash.

Before covering the NYSE, Tom and Brendan briefly discuss the American Stock Exchange. It’s currently owned by the New York Stock Exchange, but (for some stocks) it used to serve as a stepping stone between the OTC Market and the NYSE. Smaller companies started in the OTC Market and some moved to the American Exchange before finally ending up on the New York Stock Exchange. The American Stock Exchange was also sometimes called the “Curb Exchange”. It got this nickname because pre-1921 trades actually happened outdoors. Crazy stuff! During the 1980s, a lot of options trading was done through the American Exchange. Trading volume was never quite as high as the NASDAQ or NYSE though.

Finally we have the New York Stock Exchange or the “Big Board”. Located on the corner of Wall Street and Exchange Place in New York, if you’re ever in the area we recommend taking a tour. Many people think of the NYSE as a large cap exchange, but a solid percentage of the stocks trading on it are small and mid cap. Pretty much all large cap stocks are a part of the New York Stock Exchange though (not including Apple, Microsoft, and Google). The market capitalization of all the NYSE stocks is about $16 trillion!

As you can see, many differences exist between the NYSE and the NASDAQ. Make sure to listen to this week’s Mullooly Asset Management podcast to learn more about these exchanges!

You might also enjoy checking out this post regarding some additional differences between the NASDAQ and NYSE: http://www.thesecuritiesedge.com/2012/07/where-to-list-nyse-or-nasdaq/

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