The NASDAQ Stock Market, also known simply as the NASDAQ, is an American stock exchange. “NASDAQ” originally stood for National Association of Securities Dealers Automated Quotations. It is the second-largest stock market comparing to official stock exchanges by market capitalization in the world, after the New York Stock Exchange.
The exchange platform is owned by NASDAQ OMX Group, which also owns the OMX stock market network. In the NASDAQ, there are three levels of subscribers: they are level 1 to 3. For the level 3 subscribers, they are firms dealing in securities.These market makers adjust inventories of a security and ready to buy or sell these shares from or to the public at the quoted bid and ask prices.
The level 3 subscribers can make profits from the difference between the bid and ask prices. Easily say, the level 3 can enter the quote and manage the quote. For the level 2 subscribers, they are subscribers who work for the brokerage firms that can help their clients execute their quote, but they cannot put their own quote and do not actively make deal in the market through their own account.They can put all the information related to market dealers wishes to sell or buy stock and recently executed orders.
For the level 1 subscriber, like we are, the investors or the potential investors, the level 1 subscribers can receive the ask price or bid price and buy or sell the securities in the market, as well as collecting the information on current prices. Difference between NASDAQ and other U. S. Securities markets 1.
NASDAQ and NYSE (1) Location What is the location means? Location of exchange is not so much on its street address but the “place” where its transactions take place.On the NYSE, all trades occur in a physical place, on the trading floor in New York City, Wall Street maybe. However, the Nasdaq is located not on a physical trading floor but on a telecommunications network. People are not on the physical floor for exchanging or matching buy and sell orders on behalf of investors.
Instead, trading takes place directly between investors and their buyers or sellers, who are the market makers through an elaborate system of companies electronically connected to one another. (2) Dealer and Auction MarketThe Nasdaq is a kind of dealer’s market, where market participants are not buying from and selling to one another directly but through a dealer who is a market maker (NASDAQ). The NYSE is an auction market, wherein individuals are typically buying and selling between one another and there is an auction occurring; that is, the highest bidding price will be matched with the lowest asking price. (3) Traffic Control On the Nasdaq, the traffic controller is known as the market maker, who transacts with buyers and sellers to keep the flow of trading going.
On the NYSE, the exchange traffic controller is known as the specialist, who is in charge of matching up buyers and sellers. But, no matter known as the market maker or the specialist, they have different roles in the market. (4) Perception and Cost The Nasdaq is typically known as a high-tech market, attracting many of the firms dealing with the internet or electronics. Accordingly, the stocks on this exchange are considered to be more volatile and growth oriented.
On the other hand, the companies on NYSE are perceived to be more well-established.Its listings include many of the blue chip firms and industrials that were around before our parents, and its stocks are considered to be more stable and established. Whether a stock trades on the Nasdaq or the NYSE is not necessarily a critical factor for investors when they are deciding on stocks to invest in. However, because both exchanges are perceived differently, the decision to list on a particular exchange is an important one for many companies.
A company’s decision to list on a particular exchange is also affected by the listing costs and requirements set by each individual exchange.The entry fee a company can expect to pay on the NYSE is up to $250,000 while on the Nasdaq, it is only $50,000 to $75,000. Yearly listing fees are also a big factor: on the NYSE, they based on the number of shares of a listed security, and are capped at $500,000, while the Nasdaq fees come in at around $27,500. So we can understand why the growth-type stocks (companies with less initial capital) would be found on the Nasdaq exchange.
(5) Public Vs. Private The Nasdaq exchange was listed as a publicly-traded corporation, while the NYSE was private.This all changed in March 2006 when the NYSE went public after being a not-for-profit exchange for nearly 214 years. Most of the time, we think of the Nasdaq and NYSE as markets or exchanges, but these entities are both actual businesses providing a service to earn a profit for shareholders.
The shares of these exchanges, like those of any public company, can be bought and sold by investors on an exchange. (Incidentally, both the Nasdaq and the NYSE trade on themselves. As publicly traded companies, the Nasdaq and the NYSE must follow the standard filing requirements set out by the Securities and Exchange Commission. Now that the NYSE has become a publicly traded corporation, the differences between these two exchanges are starting to decrease, but the remaining differences should not affect how they function as marketplaces for equity traders and investors.
(6) The Bottom Line Both the NYSE and the Nasdaq markets accommodate the major portion of all equities trading in North America, but these exchanges are by no means the same.Although their differences may not affect your stock picks, your understanding of how these exchanges work will give you some insight into how trades are executed and how a market works. 2. NASDAQ and AMEX AMEX used to be the second largest stock and securities market in U.
S, but in the year of 1998, AMEX and NASDAQ combined to be the company of NADSAQ—AMEX. Also, in 2008, NYSE bought the AMEX by more than 20 million dollars. AMEX is almost the same as NYSE based on the operation model.But, there is still some difference between the NYSE and AMEX.
AMEX is the only securities exchange market that can trade stock, options, and derivatives at the same time. 3. NASDAQ and OTC A security traded in some context other than on a formal exchange such as the NYSE, AMEX, etc. The phrase “over-the-counter” can be used to stocks that trade through a dealer network as opposed to on a centralized exchange.
It also refers to debt securities and other financial instruments such as derivatives, which are traded through a dealer network.In general, the reason why a stock is traded over-the-counter is mainly because the company is not big enough, making it unable to meet exchange listing requirements. Also known as “unlisted stock”, these securities are traded by broker-dealers who negotiate directly with each other by computer networks and by phone. Although Nasdaq operates as a dealer network, Nasdaq stocks are generally not classified as OTC because the Nasdaq is considered a stock exchange.
As such, OTC stocks are generally unlisted stocks which trade on the Over the Counter Bulletin Board (OTCBB) or on the pink sheets.Be very wary of some OTC stocks, however; the OTCBB stocks are either penny stocks or are offered by companies with bad credit records. Instruments such as bonds do not trade on a formal exchange and are, therefore, also considered OTC securities. Most debt instruments are traded by investment banks making markets for specific issues.
If an investor wants to buy or sell a bond, he or she must call the bank that makes the market in that bond and asks for quotes. 4. Regional and ForeignIn addition to the exchanges mentioned above, there are also several regional exchanges around the country, including the Boston Stock Exchange, the Philadelphia Stock Exchange, the Pacific Stock Exchange, and the Chicago Stock Exchange. These exchanges originally listed only regional companies but now list both regional and national stocks.
There are also stock exchanges in foreign countries, such as the London Stock Exchange and the Nikkei Exchange in Japan. These exchanges are usually similar to the ones found in the United States, although there are differences depending upon the country in which they are located.