The Exchanges

Stock exchanges are organized marketplaces where securities trade. The two dominant U.S. exchanges — NYSE and NASDAQ — have different structures, histories, and personalities.

What Is a Stock Exchange?

A stock exchange is a regulated marketplace where securities are bought and sold. Exchanges provide:

• Liquidity — A ready market for buying and selling
• Price transparency — Public display of bid and ask prices
• Standardized rules — Consistent trading practices
• Investor protection — Regulatory oversight and listing standards

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The New York Stock Exchange (NYSE)

The New York Stock Exchange is the world's largest stock exchange by market capitalization of listed companies. Founded in 1792, it's often called "The Big Board."

Key Characteristics

How NYSE Trading Works

1. Orders flow to the exchange electronically or through floor brokers
2. Designated Market Makers (DMMs) maintain orderly markets in assigned stocks
3. Price discovery occurs through auction process
4. Trades execute when buy and sell orders match

DMMs (Formerly Specialists)

Designated Market Makers have special responsibilities:

• Maintain fair and orderly markets
• Provide liquidity during imbalances
• Set opening prices each day
• Quote continuous bid and ask prices

NYSE Listing Requirements

To list on the NYSE, a company must meet stringent standards:

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NASDAQ

NASDAQ (National Association of Securities Dealers Automated Quotations) is the world's first electronic stock exchange. It's known for listing many technology and growth companies.

Key Characteristics

How NASDAQ Trading Works

1. Multiple market makers compete on each stock
2. Electronic quotations display bid and ask prices
3. Orders execute through automated matching systems
4. Competition among dealers keeps spreads tight

NASDAQ Tiers

NASDAQ has three listing tiers with different requirements:

NASDAQ Listing Requirements (Capital Market)

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NYSE vs. NASDAQ: Key Differences

Which Companies List Where?

NYSE tends to attract:

• Established, blue-chip companies
• Financial services firms
• Industrial companies
• Companies seeking traditional prestige

NASDAQ tends to attract:

• Technology companies
• Biotech and healthcare firms
• Growth-oriented companies
• Companies preferring electronic trading

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Listing and Delisting

Why Companies List

• Access to capital — Easier to raise money
• Liquidity — Investors can easily buy and sell
• Visibility — Increased profile and credibility
• Currency for acquisitions — Use stock for M&A

Maintaining a Listing

Companies must continue meeting standards to stay listed:

• Minimum share price (typically $1.00)
• Minimum market capitalization
• Timely financial reporting
• Corporate governance requirements

Delisting

Companies can be delisted for:

• Falling below minimum price ($1.00) for extended periods
• Failing to meet financial requirements
• Bankruptcy
• Failure to file required reports

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Other U.S. Exchanges

While NYSE and NASDAQ dominate, other exchanges exist:

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Extended Hours Trading

Both NYSE and NASDAQ offer trading outside regular hours:

Note: Extended hours trading has lower liquidity and wider spreads.

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Key Takeaways

• The NYSE is an auction market with physical and electronic trading
• NASDAQ is a fully electronic dealer market
• Both have listing requirements that companies must meet and maintain
• DMMs (NYSE) and market makers (NASDAQ) provide liquidity
• Companies can be delisted for failing to meet ongoing standards
• Most trading now occurs electronically on both exchanges