NASDAQ vs. NYSE: A comparison of the two major U.S. stock exchanges

Published on: Mon Mar 20 2023

NASDAQ vs. NYSE: A comparison of the two major U.S. stock exchanges

The stock market is an important component of the global economy, and the United States is home to some of the largest stock exchanges in the world. The New York Stock Exchange (NYSE) and the NASDAQ are the two biggest exchanges in the United States, accounting for a significant portion of the total market capitalization of the country. While both exchanges are important in the global financial landscape, investors should be aware of some significant differences between them.

History and Size

The NYSE was founded in 1792 and is the world's oldest stock exchange. It is located on Wall Street in New York City, and its iconic building, the NYSE, is one of the world's most recognizable landmarks. With a market capitalization of more than $28 trillion as of 2021, the NYSE is the world's largest stock exchange.

The NASDAQ, on the other hand, was founded/started in 1971 and is headquartered in New York City. It lacks a physical trading floor, unlike the NYSE. The NASDAQ is the world's second-largest stock exchange, with a market capitalization of approximately $20 trillion as of 2021.

Listing Requirements

Companies that want to be publicly traded on either exchange must meet certain listing requirements. However, the NYSE's requirements are more stringent, making it more difficult/harder for small businesses to list on the exchange. To list on the NYSE, for example, a company must have at least 1.1 million publicly traded shares, a minimum share price of $4, and a total market capitalization of $100 million. In contrast, the NASDAQ requires only 1.25 million publicly traded shares, a minimum share price of $1, and a total market capitalization of $50 million.

Trading

One of the most significant distinctions between the NYSE and the NASDAQ is how trades are executed. The NYSE uses a traditional auction-style trading system, with traders executing trades on the trading floor face-to-face. The NASDAQ, on the other hand, has an electronic trading system that automatically matches buyers and sellers. This system enables faster trade execution and a more efficient market, both of which can benefit investors.

Types of Companies

The companies that typically list on each exchange differ as well. Larger, more established companies, such as Coca-Cola, Walmart, and IBM, tend to flock to the NYSE. The NASDAQ, on the other hand, is home to more technology-focused companies such as Amazon, Apple, and Facebook. While there are certainly exceptions, when comparing the two exchanges, this generalization holds up well.

Volatility

The NASDAQ is widely regarded as more volatile than the NYSE. This is because many of the NASDAQ companies are smaller, high-growth companies that are more susceptible to price swings. Furthermore, the NASDAQ's electronic trading system may/might result in faster price changes, resulting in greater volatility in the short term.

Regulation

The Securities and Exchange Commission regulates both the NYSE and the NASDAQ (SEC). Given its more traditional trading model, the SEC has more direct oversight of the NYSE. In contrast, the NASDAQ's electronic trading system is more automated, making it more difficult for the SEC to regulate.

Finally, the NYSE and the NASDAQ are two of the most important stock exchanges in the world, with significant/prominent differences. The NYSE is the more traditional exchange, with a physical trading floor and stricter listing requirements, whereas the NASDAQ is known for its electronic trading system and emphasis on technology companies. Finally, both exchanges are important in the global economy, and investors should understand the differences between them in order to make sound investment decisions.

Returns are subject to market risk.

Past performance do not assure future returns.

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