The New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automated Quotations (NASDAQ) are both well known in the trading sector for providing high-end stock trading platforms. Both these stock-exchange giants are well-known and famous as majority of the North American equities trade either on NYSE or Nasdaq. Companies going public have to decide where they want to list their shares.
The Nasdaq started off as the world's first electronic trading market and because of this has attracted most of the tech companies. Both the stock exchanges try hard to get a company listed on their exchange. The success of tech IPOs in the past decade has made NYSE try harder to get tech companies listed. It has been helped to some extent with the Facebook IPO disaster, and has been able to get companies like Pandora (NYSE:P), and LinkedIn (NYSE:LNKD) to list on NYSE. Even Alibaba, which had a high profile tech IPO last year, decided to list the BABA stocks on NYSE.
How It All Started
Compared to the NASDAQ, the NYSE is far older. Founded in the year 1792 when 24 brokers signed the Buttonwood Agreement to start trading securities, the NYSE has now grown to become the world’s largest stock exchange in terms of the accrued market capitalization of its listed companies.
The NASDAQ was founded in the year 1971 by the NASDAQ OMX Group, which began trading electronically for the first time in the world. Although the NYSE leads the stock market in market capitalization, the NASDAQ is the leader when it comes to market share and the sheer volume traded.
Both of these organizations operate out of New York.
How Do They Trade?
The essential difference between the NYSE and NASDAQ is their trading principles—the former is an auction market, while the latter is a dealer’s market.
In the NYSE, the buyers and sellers trade physically by comparing bid prices and ask prices. If a buyer wishes to invest in a stock, he/she must place an order either to the floor broker or by entering the order into the Universal Trading Platform. A specialist, who is not an NYSE employee, supervises all the trades done by a given company. This specialist will act as a middleman between the buyer and the seller to smoothly complete the trade.
Trading acquires a different climate in the NASDAQ when compared to the NYSE. Here, the buyers and sellers transact through a dealer. There are only two ways to make a trade in the NASDAQ: Stock brokers must either call the dealer or use the online execution system to enter an order. Likewise, dealers must also enter their prices in the system for both selling and buying. The trade is finally executed by the electronic system by matching the prices of both the buyers and the sellers. So, the NASDAQ is quintessentially different from the NYSE because of its exclusively electronic transactions.
Getting On The Market
The NYSE and NASDAQ both demand different initial requirements and fee structures from companies that want to be listed on their respective stock exchanges. The following table delineates these differences:
|The company must have issued a minimum of 1,100,000 shares to 400 shareholders at least.||The company must have publicly traded at least 1,250,000 shares, with a minimum bid price of $4.|
|The market value of the company’s public shares must be a minimum of $40 million, with $4 being the minimum share price.||The company must have a minimum of three dealers for its stocks.|
|For the past three years, the company’s pre-tax aggregate should be $10 million, with the last year having $2 million.||For the past three years, the company’s pre-tax aggregate should be $11 million, with the last year having $2.2 million.|
|The entry fee for a company to be listed on the NYSE goes up to $250,000.||The entry fee for a company to be listed on the NASDAQ is from $50,000 to $75,000.|
|The NYSE collects a maximum yearly fee of $500,000.||The NASDAQ collects a yearly fee of around $27,000.|
Both these stock exchanges profit greatly from listing fees. To give you a general ideal of how profitable listing fees are, consider that in 2011, 22% of the NASDAQ’s total revenue came from listing fees and other such corporate services. For the NYSE, listing fees made up 17% of their revenues in the same year.
What Sort Of Companies Are Listed?
The nature of the companies that enter into these two stock exchanges is considerably different. Well-established companies with rich legacies and long-standing stability are usually listed in the NYSE. Examples include:
|Stocks on NYSE||Info as of Feb, 2015|
Walmart stock analysis
|Amazon's brick and mortar competitor with a market cap of $269 billion.|
|Coca Cola (NYSE:KO)||Buffett's favourite stock and has been a part of his stock picks for 26 years.|
|Citigroup (NYSE:C)||Citi revenue stood at $90.57 billion, and net income was $7.31 billion for 2014.|
IBM stock analysis
|One of the oldest trading stocks on NYSE, is trying to stay relevant with new businesses and strategic partnerships like the one with Apple.|
In contrast, the quickly growing, Internet or technology-based companies are usually listed under the NASDAQ. It is viewed as a high-tech exchange with more stock volatility. Some of the more famous companies under the NASDAQ include:
|Stocks on Nasdaq||Info as of Feb, 2015|
Facebook stock analysis
|Facebook global ad revenue has increased and is second only to Google's. This social media giant has built a solid and growing flow of revenue.|
Apple stock analysis
|One of the most innovative tech companies of the decade, Apple cash on hand stood at $178 billion as of last year.|
Google stock analysis
|The world's number 1 search engine, Google is a stable investment among internet stocks.|
Amazon stock analysis
|A high PE ratio, revenue focused strategy characterize this online retailer.|
As of 2014, the number of companies listed in the NYSE and NASDAQ are 1,860 and 2,900 respectively. The market capitalization in the same year for the NYSE was $16.6 trillion and for the NASDAQ was $8.5 trillion. As mentioned above, the NYSE leads the stock exchange market in terms of market capitalization.
Both of these organizations have a wide range of indices for the benefit of the investors and issuers. The following lists a few of the indices of both the companies:
NYSE Indices: The Dow Jones Industrial Average, the NYSE Composite, and NYSE Equity Indices.
NASDAQ Indices: The NASDAQ Composite, NASDAQ Biotechnology, and NASDAQ-100.