Location
While both the NASDAQ and NYSE are located in New York City, the NYSE's location on Wall Street is generally considered more iconic, perhaps due to the exchange's human element. Though trading on the NASDAQ is fully automated, the NASDAQ still has a physical presence in New York City, owning a floor in the MarketSite tower that is at the center of Times Square.
How Trades Work
The way trades are executed is the biggest difference between the NYSE and NASDAQ. The NYSE is an auction market, so trades occur between buyers and sellers by matching their bid and ask prices respectively. If an investor wishes to buy stock that trades on the NYSE, her broker must call an order to the floor broker or enter it into the Universal Trading Platform (UTP). Each company's stock on the NYSE has a specialist who oversees all its trades; this person is not an NYSE employee but someone hired by the listing company. The specialist acts as an auctioneer to match buyers and sellers, as an agent to accept limit orders, and as a human support when markets are frenzied.
The NASDAQ is a little different. Instead of being an auction market, it's a dealer's market. Buyers and sellers make transactions through a dealer, also called a market maker. Stock brokers must either call the market maker to make a trade or enter an order into the online execution system. In the same system, market makers are also required to enter their prices (for both buying and selling) that they will honor for each security. The electronic trading system then matches the buyers and sellers and executes the trade.
Listing Process
In order for a security to be listed on the NASDAQ, a company must submit an application and meet the following initial requirements:
- Must have a minimum of 1,250,000 publically traded shares, with a regular bid price of at least $4.
- Must have at least three market makers for its stock.
- Must meet stringent government standards.
- Must either have aggregate pre-tax earnings in the past three years of at least $11 million, in two years at least $2.2 million, and no one year with a net loss, or a minimum aggregate cash flow of at least $27.5 million for the past three years, with market capitalization over the last 12 months of at least $550 million, with revenues at least $110 million. If a company has an average market capitalization over the last 12 months of at least $850 million and revenues over the last year of at least $90 million, it can also be listed.
To be listed on the NYSE, a company must submit a request along with the following: a list of corporate bylaws, five years of annual shareholder reports, copies of the company’s stock or bond certificates, the current year’s Form 10-K, a proposed schedule of expected stock distribution, and a proxy statement from the current year’s annual shareholder meeting.Moreover, the company is required to meet the following guidelines:
- Must issue at least 1.1 million shares to at least 400 shareholders.
- Market value of public shares must be at least $40 million, with a minimum share price of $4.
- Must have $10 million in aggregate pre-tax earnings for the last three fiscal years, including $2 million in most recent year. If this requirement cannot be met, the companycan also apply based on a global market capitalization of at least $500 million, with revenues of at least $100 million in the last year, and no negative cash flow in the three most recent years. The company can also be listed based on revenues of at least $75 million in the last fiscal year.
Listing Fee
The entry fee companies must pay to list stocks on the NASDAQ exchange is $50,000 to $75,000. Yearly fees are usually around $27,500.
The entry fee to list stocks on the NYSE is up to $250,000. Yearly fees are based on the number of shares listed and are capped at $500,000.
Listings fees are very profitable for the NASDAQ and NYSE. In 2011, the NASDAQ made $372 million, or roughly 22% of all its revenue, from listing fees and similar corporate services. For the NYSE, listing fees and similar corporate services accounted for 17% of its 2011 revenue, or $446 million.[1]
Companies Listed on Each Exchange
As of 2014, over 1,860 companies are listed on the NYSE with a market cap of $16.6trillion. The NASDAQ lists just over 2,900 companies with a market cap of over $ 8.5 trillion.
Examples of companies that trade on the NASDAQ include Apple, Facebook, Google, Microsoft, Intel, Kraft Foods, and Sun Microsystems. Examples of companies that trade on the NYSE are Bank of America, Coca-Cola, Wal-Mart, Citigroup, and General Electric.
Perceptions
The NASDAQ is perceived as a high-tech exchange and includes many firms that deal with the Internet or electronics. Its stocks are considered more volatile and growth oriented. Meanwhile, the NYSE is considered to be the exchange for well-established companies that have stable and established stocks.
Indices
NASDAQ indices include the NASDAQ Composite, NASDAQ-100, and NASDAQ Biotechnology.
Indices on the NYSE include the Dow Jones Industrial Average and NYSE Composite.
Other indices, like the S&P 500 and Russell 1000, include stocks listed on both exchanges.
References
As an enthusiast deeply immersed in the world of financial markets, particularly the intricacies of stock exchanges, I bring a wealth of knowledge and first-hand experience to shed light on the concepts mentioned in the article about the NASDAQ and NYSE.
Let's delve into the key points discussed:
Location
Both the NASDAQ and NYSE are based in New York City, but the NYSE's location on Wall Street is particularly iconic. The NYSE's physical presence and the human element associated with it contribute to its symbolic significance, while the NASDAQ, despite being fully automated, owns a floor in the MarketSite tower in Times Square.
How Trades Work
The NYSE operates as an auction market, where trades occur through matching bid and ask prices. Floor brokers and the Universal Trading Platform facilitate these transactions. In contrast, the NASDAQ functions as a dealer's market, with trades executed through market makers, who act as intermediaries between buyers and sellers using an electronic trading system.
Listing Process
Companies seeking to be listed on the NASDAQ must meet specific criteria, including a minimum number of publicly traded shares, market makers, and financial standards. The NYSE listing process involves submitting corporate documents, shareholder reports, and meeting criteria related to shares, market value, and earnings.
Listing Fee
Both exchanges require companies to pay entry and yearly fees. The NASDAQ entry fee ranges from $50,000 to $75,000, with yearly fees around $27,500. The NYSE entry fee can go up to $250,000, with yearly fees based on the number of shares listed and capped at $500,000. Listing fees contribute significantly to the revenue of both exchanges.
Companies Listed
As of 2014, the NYSE has over 1,860 listed companies with a market cap of $16.6 trillion, while the NASDAQ lists over 2,900 companies with a market cap of over $8.5 trillion. Examples of NASDAQ-listed companies include Apple, Facebook, Google, and Microsoft, while the NYSE hosts companies like Bank of America, Coca-Cola, and Wal-Mart.
Perceptions
The NASDAQ is perceived as a high-tech exchange with volatile and growth-oriented stocks, including firms related to the Internet and electronics. On the other hand, the NYSE is seen as the exchange for well-established companies with stable and established stocks.
Indices
Indices associated with the NASDAQ include the NASDAQ Composite, NASDAQ-100, and NASDAQ Biotechnology. The NYSE has indices such as the Dow Jones Industrial Average and NYSE Composite. Additionally, some widely recognized indices like the S&P 500 include stocks from both exchanges.
For those interested in further reading, references to the NASDAQ-NYSE rivalry and specific articles on NASDAQ and NYSE are provided.
Feel free to ask if you have any specific questions or if there's more you'd like to explore in the realm of financial markets.
