Definition
NASDAQ (National Association of Securities Dealers Automated Quotations) and NYSE (New York Stock Exchange) are two prominent stock exchanges in the US where public companies list their shares for trading. NASDAQ, known for technology and growth-oriented firms, is a dealer’s market where trading takes place electronically. On the other hand, the NYSE, with a wider range of companies, operates as an auction market with a physical trading floor managed by specialists.
Key Takeaways
- One key distinction is the companies that list on these exchanges. NASDAQ is known for its large technology companies like Apple and Google, while NYSE is home to older, more established firms in industries like finance and manufacturing.
- The trading mechanisms between NASDAQ and NYSE also differ. NASDAQ utilizes a multiple market maker system to facilitate trading, which offers a competitive market, results in reduced prices. NYSE, on the other hand, uses a single designated market maker for each stock, which may enhance stability and liquidity.
- Lastly, NASDAQ is virtual, relying entirely on telecommunications networks. NYSE, in contrast, has a physical trading floor located in New York City, combining face-to-face trading with electronic trading.
Importance
The distinction between the National Association of Securities Dealers Automated Quotations (NASDAQ) and New York Stock Exchange (NYSE) is crucial in finance due to their unique qualities and the types of companies they attract.
NASDAQ, being a dealer’s market, predominantly attracts technology-oriented or younger and high-growth companies, while NYSE, an auction market, is populated largely by established companies with more traditional business models.
Both exchanges boast rigorous standards for inclusion, fostering investor confidence.
Yet, the emphasis NASDAQ places on modern business and NYSE on long-standing giants exemplifies different investment strategies.
The comparison of NASDAQ and the NYSE, therefore, provides an investor with valuable insight into the nature and potential behaviour of stocks available in the market.
Explanation
The NASDAQ and the New York Stock Exchange (NYSE) serve as platforms where investors can trade securities, and businesses can raise capital. These exchanges grant listed companies the ability to tap into the largest pool of potential investors and offer investors a venue to buy and sell shares.
Both the NASDAQ and NYSE stand as pillars of modern global finance, providing a marketplace for economic transactions. The NASDAQ, known for attracting technology firms, is identified as a dealer’s market, which means transactions are conducted electronically through a network of dealers—not directly with each other.
This setup enhances the speed and efficiency of trading, making it appealing to companies that value these qualities. On the other hand, the NYSE, home to many of the world’s largest and most well-established companies, operates through an auction-based model.
In this case, designated market makers trade on behalf of companies, helping to maintain an orderly market. The main role of these marketplaces is to increase economic growth by fostering the flow of capital.
Examples of NASDAQ vs NYSE
Apple Inc. – This is a technology company that is listed on the NASDAQ stock exchange. When it first went public in 1980, it chose NASDAQ because it was a more tech-oriented exchange compared to the NYSE.
General Electric – This is a multinational conglomerate which has its stock listed on the New York Stock Exchange. It is one of the original 12 companies listed on the NYSE, showcasing its long-standing history and mature market status.
Alphabet Inc. – Google’s parent company, Alphabet Inc., is listed on the NASDAQ. Google chose NASDAQ at its initial public offering in
The NASDAQ’s more tech-focused reputation is likely a major reason why a tech giant such as Google would choose to be listed there. In summary, younger, tech-oriented companies may choose to list on NASDAQ, while older, more established companies may lean towards the NYSE. However, there are always exceptions and other factors that can influence a company’s decision.
NASDAQ vs NYSE: Frequently Asked Questions
What is NASDAQ?
NASDAQ, an acronym for the National Association of Securities Dealers Automated Quotations, is an American stock exchange that serves as a global electronic marketplace for securities trading. It was the world’s first electronic stock market and is characterized by its focus on technology, growth-oriented companies.
What is NYSE?
The New York Stock Exchange (NYSE), sometimes known as the “Big Board”, is the largest stock exchange in the world by market capitalization. It is a physical, or “outcry,” exchange, where human brokers execute trades in a central location. It’s home to many of the world’s largest and most well-established companies.
What is the main difference between NASDAQ and NYSE?
The main difference between NASDAQ and NYSE lies in the way securities on the exchanges are transacted between buyers and sellers. NASDAQ is a dealer’s market, where market participants are not buying from and selling to one another directly but through a dealer who is a market maker. On the other hand, the NYSE is an auction market, which means individuals are typically buying and selling to each other while the ‘auctioneer’ facilitates the matching process.
Which is bigger, NASDAQ or NYSE?
In terms of total market capitalization, the New York Stock Exchange (NYSE) is larger than NASDAQ. However, in terms of the total number of listed companies, NASDAQ has more, many of which are related to the tech industry.
What types of companies are listed on NASDAQ and NYSE?
Historically, the NASDAQ attracted more technology and growth-oriented businesses, while the NYSE attracted more established, blue-chip firms. However, this line has blurred over time, and today one can find a diverse mix of companies on both exchanges.
Related Entrepreneurship Terms
- Electronic Trading
- Listing Requirements
- Market Capitalization
- Trading Hours
- Index Tracker Funds
Sources for More Information
- Investopedia – A leading source of financial content on the web.
- The Balance – Provides clear, practical advice to help you make your best financial decisions.
- NASDAQ.com – The official website of the NASDAQ stock exchange.
- NYSE.com – The official website of the New York Stock Exchange.
