Before diving in, if you want to know what the Nasdaq is or want a little more information about the New York Stock Exchange, then make sure to check out our blog posts.
There are two main differences between the two exchanges. They are;
The types of companies that are listed on the exchanges
The way they operate
Listed companies
The NYSE is home to a lot of 'blue chip' companies such as Walmart, Exxon Mobil and Pfizer. These sorts of businesses are well-established and have been around a while. As the New York Stock Exchange has been in operation since 1792, its reliable reputation continues to serve itself well for businesses that prioritise a reliable route to success.
The Nasdaq is also home to reputable companies, but they tend to be the more tech oriented firms such as Google, Amazon and Meta. In more recent years, companies often look towards the Nasdaq for quicker growth, largely because it was home to many businesses that flourished during the dot-com bubble. The Nasdaq only began trading in 1971 which is why any companies founded before that date will more than likely be listed on the NYSE.
How they operate
The NYSE is an 'auction market' and the Nasdaq is a 'dealer market' and this makes the way they work very different.
Auction market
In the auction market, the NYSE acts as a centralised hub that allows trades to be executed as they match buyers and sellers when they want to trade stocks and shares. Traders don’t buy and sell from each other, rather, all transactions go through the stock exchange.
Dealer market
In a dealer market, people will buy directly from each other meaning they are ‘market makers’. People don’t directly communicate with each other on the stock floor, instead, it is an electronic process with no communication other than the buy and sell requests. The price at which someone would buy a stock is known as ‘the bid’ and the price someone will sell is called ‘the offer’.
In a dealer market, one person’s sold stock directly becomes another person’s bought stock. Of course, you need a central body to facilitate this process, and that’s exactly what the Nasdaq does.
As an investor or trader, you don’t need to worry too much about this. It doesn’t change the experience of buying a stock through our app.
Don’t forget to visit our blog post on the opening and closing times for stock markets across the globe.
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