What are the differences between NYSE and NASDAQ? When we talk about the stock market, we usually encounter the terms NYSE or NASDAQ. It is because they are the two biggest stock exchanges in the world. Both of them are excellent platforms if you want to participate in securities trading. At first glance, these two platforms look similar; however, there are significant differences between them. We will find out about the differences between NYSE and NASDAQ in the following.
What are the Differences between NYSE and NASDAQ?
Location
The first difference we are going to talk about is their location. Both of these exchanges are in New York City. However, the location of their transactions differs from each other. When we say the location of the transaction, we do not refer to the street address; it is the place where they transact orders.
- NYSE carries its transactions in physical trading floor on Wall Street in New York City, while the data center of transactions is in Mawah, New Jersey.
- NASDAQ is electronic exchange which means it does not have physical trading floor. The operations take place via direct trading between investors and market makers.
Auction Market vs Dealer Market
In this step, we will compare how buyers and sellers trade securities in the exchanges. NYSE operates as an auction market.
Trades are executed on the NYSE and other stock exchanges by matching bids offered by buyers and sellers. The highest offer, or the amount a buyer is willing to pay, is matched with the seller’s lowest asking price.
On the other hand, trades on Nasdaq are conducted through a dealer rather than directly between the buyer and seller. The dealer, also known as a market maker, facilitates exchanges between buyers and sellers. The dealer is a computer, and all deals at Nasdaq are performed electronically in fractions of seconds.
Size and Number of Listings
There are more than 2,400 companies that combine for $21.3 trillion in market capitalization in NYSE. Moreover, several giant “blue chip” companies such as Exxon Mobil, The Procter & Gamble Company, 3M Company, Johnson & Johnson are listed in this exchange. One of the reasons behind this is the company started its operations back in 1792.
Meanwhile, NASDAQ has more companies than NYSE but has a broader range of company sizes. Even if NASDAQ is well-known for having huge companies such as Facebook, Amazon, and Google, it also has a large number of small listings. NASDAQ, the 46-year-old exchange, has about 1,200 smaller securities with a market capitalization of around $200 million or less.
The Nasdaq has almost 3,800 companies listed, with a total market capitalization of $11 trillion.
Listing Requirements
The exchanges have very different listing requirements. For instance, NASDAQ does not include the company in its listings if it does not own at least 1,250,000 shares available for the public to trade. Meanwhile, the NYSE list companies that issue at least 400 to 1,100,000 shareholders. The next big difference is fees; The entry fee for NYSE reaches up to $500,000. Meanwhile, companies pay from $50,000 to $75,000, with a yearly payment of around $27,000 to enter NASDAQ listings.
Private vs Public
Today, the ownership structure of exchanges differs from what it used to be in the past. Initially, NASDAQ was a publicly-traded company, and the NYSE was private. However, it changed in the March of 2006. The NYSE went public, and traders could trade its shares on an exchange. Traders can use the Nasdaq and NYSE platforms to invest in Nasdaq and NYSE stocks.
Market Maker vs. Designated Market Maker
In the NYSE, the role of maintaining the market falls to designated market makers (DMMs), formerly known as specialists. DMMs have more responsibilities than traditional market makers, including managing the opening and closing auctions and providing liquidity during trading imbalances. On the other hand, Nasdaq utilizes a network of more than 500 competitive market makers that enhance liquidity and help narrow the bid-ask spread for the securities they cover.
Historical Context
The New York Stock Exchange, established on May 17, 1792, is the oldest American exchange still in operation. It started with the Buttonwood Agreement signed by 24 stockbrokers outside 68 Wall Street. Nasdaq, created by the National Association of Securities Dealers, emerged as the world’s first electronic stock market on February 8, 1971, making it a much younger but innovative market player.
Perception and Costs
The NYSE is often perceived as the more traditional and prestigious venue, suitable for well-established, blue-chip firms. In contrast, Nasdaq is seen as the home for technology and innovation-driven companies, appealing to younger, high-growth entities. The cost of listing on the Nasdaq is generally lower than on the NYSE, making it an attractive option for these dynamic companies.
Which Exchange is Better for You?
Volatility: If you wish to invest in stocks with the potential for quick price swings, the NASDAQ will be a good choice. If you want to invest in more stable stocks, the NYSE stocks are a better choice.
Trading style: Unlike the NYSE, the NASDAQ does not have the option of using floor brokers. It only trades electronically. However, both the NASDAQ and the NYSE provide items exchanged through third parties. So there are distinctions between the NYSE and NASDAQ, two of the world’s largest stock exchanges. Both of these transactions share and vary in some ways. You can choose stocks based on the variations across stock exchanges.
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FAQs
1. What is the main difference between NYSE and Nasdaq?
The main difference between the New York Stock Exchange (NYSE) and the Nasdaq is their trading platforms. NYSE is an auction market that uses floor traders to make most of its trades, while Nasdaq is a dealer market that operates electronically through a network of computers, allowing for faster trading and greater transparency.
2. Which is best, Nasdaq or NYSE?
Neither exchange is inherently better than the other; the choice depends on a company’s specific needs and goals. Nasdaq is often favored by tech and growth-oriented companies due to its modern electronic trading model and lower listing costs, whereas NYSE is preferred by many established, blue-chip companies for its prestige and historical significance.
3. What is one major difference between the New York Stock Exchange (NYSE) and the Nasdaq stock exchange?
One major difference is their market structure. The NYSE operates as a hybrid, offering both electronic trading and face-to-face transactions on the trading floor. Nasdaq, on the other hand, is purely electronic, which generally allows for quicker transactions and potentially less human error.
4. What is the difference between NYSE and Nasdaq market maker?
NYSE market makers (known as Designated Market Makers – DMMs) have obligations to maintain fair and orderly markets in their assigned securities and to facilitate price discovery during market openings, closings, and periods of significant imbalances. Nasdaq market makers, on the other hand, compete with one another, and are not assigned specific securities, leading to a more decentralized and competitive environment.
5. Is Tesla on Nasdaq or NYSE?
Tesla, Inc. is listed on the Nasdaq.
6. Is Apple on Nasdaq or NYSE?
Apple Inc. is listed on the Nasdaq.
7. Who is no. 1 in the share market?
This can vary depending on the metric used (e.g., market capitalization, share volume). As of recent data, Apple Inc. often ranks as the number one company in terms of market capitalization.
8. Why switch from NYSE to Nasdaq?
Companies might switch from the NYSE to Nasdaq for various reasons including lower listing fees, a fully electronic trading platform which can be more attractive for tech-oriented businesses, and alignment with other major tech companies.
9. What does S&P 500 stand for?
The S&P 500 stands for the Standard & Poor’s 500 Index, which is a market-capitalization-weighted index of 500 of the largest publicly traded companies in the U.S. It is designed to be a leading indicator of U.S. equities and is widely regarded as the best single gauge of large-cap U.S. equities.
10. What is the difference between NASDAQ and NYSE IPO?
The main difference in their IPO processes is in the type of market participants involved. NYSE has a more traditional approach involving underwriters and an auction process through its floor traders. Nasdaq’s process is fully electronic, which might appeal to tech companies and provides a quicker and potentially less costly IPO process.
11. What is the difference between NYSE and Dow Jones?
The NYSE is a stock exchange where stocks are bought and sold, whereas the Dow Jones Industrial Average (often simply referred to as the Dow) is an index that measures the stock performance of thirty large, publicly-owned companies based in the United States. The Dow Jones is one of the indices that includes stocks listed on the NYSE but also includes stocks from other exchanges.