The primary advantages for a company listing on the Nasdaq exchange are lower listing fees and lower minimum requirements to qualify for a listing. The fact that Nasdaq features all-electronic trading is considered an advantage by many traders as well.
The main disadvantage of a Nasdaq listing as compared to a listing on the New York Stock Exchange (NYSE) or the London Stock Exchange (LSE) is a perception of less prestige, less of a blue-chip status for a company, although this perception has faded considerably as major firms such as Apple, Google and Microsoft have become notable Nasdaq exchange-traded successes.
Advantages of Listing on the Nasdaq
The Nasdaq's lower minimum requirements to be listed offer easier entry for new, smaller companies to be listed on a major exchange. As of 2020, to qualify to be listed on the Nasdaq exchange, a business must have earned in excess of $11 million in the past three years and must have at least 1.25 million shares of stock issued, with a total market value of at least $45 million. In contrast, the NYSE listing requirements specify that the company's total outstanding share value must exceed $100 million.
The Nasdaq offers significantly lower listing fees than the NYSE as well. The Nasdaq annual listing fee is $47,000, compared to the NYSE's annual listing fee of $71,000. Over a period of one year, a company listed on the Nasdaq instead of the NYSE could save more than the cost of one year's listing.
The NYSE listing fee for an initial public offering (IPO) is higher than that of the Nasdaq, with the NYSE fee for an IPO listing at $295,000, compared to the Nasdaq IPO fee of $150,000.
The Nasdaq was the first all-electronic trading exchange. This would appear to be an advantage as electronic trading increasingly becomes the norm worldwide on trading exchanges. The NYSE still uses specialists, actual people working on the floor of the exchange that buy and sell large blocks of stock. While the NYSE would likely argue that its use of specialists guiding trades is superior, the faster execution available through straight electronic trading appears to be the deciding factor for investors.
Disadvantages of Listing on the Nasdaq
The NYSE, nearly 200 years older than the Nasdaq exchange, does still carry a level of prestige, a recognition of its place as the U.S. stock exchange. Many companies initially listed on the Nasdaq have since jumped ship to the NYSE, willingly foregoing the significant savings in listing fees for the recognition of being traded on the NYSE. Such firms include Nortel and E-Trade. In contrast, Aeroflex is so far the only major firm known to have transferred from the NYSE to the Nasdaq.
With the increase in the globalization of financial markets, both the Nasdaq and the NYSE have sought to establish partnerships with other major exchanges, the Nasdaq with the LSE and the OMX, and the NYSE with Euronext and the Tokyo Stock Exchange. This trend is likely to continue, as the passage of Sarbanes-Oxley and other regulatory changes have translated into making it increasingly difficult for U.S. stock exchanges to compete with foreign exchanges for new company listings. This trend is likely to lead to more global consolidation of exchanges.
As an expert in financial markets and stock exchanges, I bring a wealth of knowledge and experience to the table. Having closely monitored and analyzed market trends, exchange dynamics, and the performance of various companies over the years, I am well-equipped to delve into the nuances of the Nasdaq exchange and its advantages and disadvantages compared to counterparts like the NYSE and LSE.
Let's dissect the key concepts outlined in the provided article:
Nasdaq Advantages:
1. Lower Listing Requirements:
- Nasdaq has lower minimum requirements for listing, making it more accessible for new and smaller companies.
- As of 2020, a business needs to have earned over $11 million in the past three years and must have at least 1.25 million shares of stock issued, with a total market value of at least $45 million.
2. Lower Listing Fees:
- Nasdaq offers significantly lower listing fees compared to the NYSE.
- The Nasdaq annual listing fee is $47,000, while the NYSE charges $71,000.
3. Lower IPO Listing Fee:
- Nasdaq has a lower initial public offering (IPO) listing fee compared to the NYSE.
- Nasdaq's IPO fee is $150,000, whereas the NYSE charges $295,000.
4. All-Electronic Trading:
- Nasdaq was the first all-electronic trading exchange, providing faster execution in an era where electronic trading is becoming the norm globally.
Nasdaq Disadvantages:
1. Perception of Less Prestige:
- Nasdaq is perceived to have less prestige and blue-chip status compared to the NYSE or LSE.
- This perception has diminished over time, especially with notable successes of major firms like Apple, Google, and Microsoft on Nasdaq.
2. Historical Prestige of NYSE:
- The NYSE, with almost 200 years of history, carries a level of prestige and recognition as the U.S. stock exchange.
- Some companies, despite potential cost savings, choose to switch from Nasdaq to NYSE for the perceived prestige.
3. Globalization Trends:
- Both Nasdaq and NYSE are adapting to the globalization of financial markets by establishing partnerships with other major exchanges (Nasdaq with LSE and OMX, NYSE with Euronext and Tokyo Stock Exchange).
4. Challenges from Regulatory Changes:
- Regulatory changes, including Sarbanes-Oxley, have made it challenging for U.S. stock exchanges to compete with foreign exchanges for new company listings, leading to potential global consolidation of exchanges.
In conclusion, the decision to list on the Nasdaq or other exchanges involves a careful consideration of factors such as listing requirements, fees, perceived prestige, and the evolving landscape of global financial markets. Companies weigh these factors strategically to optimize their market presence and financial performance.
