Ever heard of the National Association of Securities and Dealers Automated Quotations (NASDAQ) or New York Stock Exchange (NYSE)?
These are reputable systems when you talk about stock exchange trading. If you’re new to the whole concept of stock trading, don’t worry, you would know more.
Did you know how stock exchanges work? Stock exchanges typically involve trades between buyers and sellers.
As you continue reading this post, you would encounter more below about stock exchanges in general, NASDAQ, NYSE and the worth of these Exchange companies in their market capitalization.
How the Stock Exchange Work?
A stock market is a place or platform of an auction where different investors scale through in order to buy and sell different shares of stocks that are in line with their choices.
The United States of America has the two largest stock exchanges in the world. The two largest stock exchanges are; The New York Stock Exchange (It has 2,400 companies) and the National Association of Securities Dealers Automated Quotations which is commonly known as NASDAQ (It has about 3,700 companies).
These two largest stock exchanges match buyers with sellers in other to make marketing fair and easy. The NYSE headquarters could be found in Wall Street while NASDAQ’s headquarters is located in Times Square.
The NASDAQ stock exchanges are performed online where buyers and sellers would be matched together in a matter of seconds.
The NYSE performs its stock exchanges in an auction house where there is market marker who stands between the buyers and the sellers in order to achieve fair and successful sales.
In a stock market, prices of the stocks seems to be the determinant of every company’s earnings. For example, learn more about Nigerian stock exchange listed companies.
Here is exactly how the stock market works; every seller wants to make profit from the stocks he/she has for sale while every buyer would also work towards getting the lowest price for the stocks he/she wants to buy so as to resell also, and make more profit too.
The stock market is not the actual economy but it affects the economy either positively or negatively. The Negative part is where there is a crash in the stock market and with that, it could lead to recession or lower the economy.
What Is NASDAQ?
NASDAQ stands for National Association of Securities Dealers Automated Quotations.
NASDAQ is an electronic exchange that in the trading of stocks with the use of automated network computers.
Origin of the National Association of Securities and Dealers Automated Quotations
NASDAQ was created by the National Association of Securities Dealers (NASD) in 1971 and it became the first electronic stock market in the world.
It commenced it first operation in October 8, 1971 as it allows investors to trade securities on a computerized, fast and reliable system.
NASDAQ is popularly called OTC market because of its regular facilitation of OTC trading. One of the biggest achievement of NASDAQ is that, it was the first stock exchange to launch a website, which gave it a lot of advantages to sell its technologies to other exchanging companies around the world.
Currently, NASDAQ is the second largest stock exchange company in the world as measured through its market capitalization.
NASDAQ has the highest trade volume in the U.S Market and has more than $10 trillion worth of companies’ trades in line with 3,700 companies listing it has.
In 2006, NASDAQ started operating national securities exchange as it officially separated from NASD. A year after, NASDAQ emerged with the Scandinavian exchange group OMX in which gave room for the name “NASDAQ OMX group”.
The electronic trading model of NASDAQ has made it a well standard exchange market worldwide.
NASDAQ has most of the world’s technology giants listed among its companies listing, which include companies like Apple, Facebook, Google, Microsoft, Oracle, Amazon and many more.
NASDAQ is usually opened for trading between 9 a.m. ET and 4:30 p.m. ET. Pre-market and post-market hours are offered to traders.
The pre-market hour starts from 4:00 AM and ends 9:30 AM ET while the post market hours starts from 4:30 PM and ends 8:00 PM ET.
What Kinds of Stocks Are Traded In NASDAQ?
NASDAQ is the largest electronic stock exchange market in the world. It is of no doubt that most of the stocks on NASDAQ are tech- related because it has a higher technological trading system that attracts other investors that specializes in tech, biotech and many more.
The companies associated with NASDAQ are from different countries around the world, and there are big and small companies.
Among the big companies, there are four companies associated with NASDAQ, which are well known to the world for their initiatives, techs, online and electronic systems.
These companies are; Apple, Google, Microsoft and Amazon. They have contributed greatly to the market capitalization of NASDAQ for these companies have a market capitalization which is above $800 Billion.
Also Read: The key functions of the Securities and Exchange Commission
Also NASDAQ is volatile unlike NYSE and this gives room for momentum investors and short term traders (even day traders).
Majority of NASDAQ sub-sectors are computer manufacturing, software, semi-conductors, electronics and data processing.
There are two major indexes in NASDAQ which are:
- NASDAQ Composite
The NASDAQ Composite keeps track of all stocks available but does not keep track of derivative securities and mutual funds.
- NASDAQ 100
NASDAQ 100 tracks the largest 100 NASDAQ stocks that does not include other companies in the financial sectors.
What Are the Differences Between NASDAQ and NYSE?
Here is brief reminder on what NASDAQ and NYSE are; NASDAQ Stands for National Association of Securities Dealers Automated Quotations While the NYSE stands for New York Stock Exchange.
These two Stock exchanges have similar functions but they are different stock exchange companies in New York, United States of America.
Therefore, some of the differences between NASDAQ and NYSE are seen below:
- The Established Year:
NASDAQ was founded in the year 1971 while NYSE was founded in the year 1792.
- Listing Fee: In NASDAQ Exchanges, the entry fee usually comes at the range of $50,000 to $75,000 and the yearly listing fee is capped around $27,000
In NYSE Exchanges, the entry fee usually comes around $500,000 and also, depending on the number of shares of a listed security, the yearly listing is mostly capped around $500,000 as well.
- Market Capitalization
The NASDAQ Exchanges have about 3,700 listings which as well made it possible for NASDAQ to have a market capitalization of $11 trillion.
The NYSE Exchanges have companies listing of about 2,400 and has a market capitalization of $21.4 trillion, which is the highest market capitalization among all other exchange companies.
NASDAQ have 3 indices which are; NASDAQ composite, NASDAQ – 100, NASDAQ Biotechnology, while NYSE has 2 indices which are; NYSE composite and NYSE 100.
- Size and Number of Listings
NASDAQ has about 3,700 companies which has generated a market capitalization of $11 trillion while NYSE has 2,400 companies which has also generated a market capitalization of $21.4 trillion.
Although, NASDAQ might have more listing companies than NYSE but the NYSE has higher market capitalization than NASDAQ.
- Traffic Control
NASDAQ has more than one market marker on each security in which gives room for efficient and fast trading while NYSE usually have one designated market marker (DMM) who ensures a fair and orderly market trades between buyers and sellers.
NASDAQ is commonly known for high tech markets in which most internet and electronic firms are well attracted due to its electronic market standard while NYSE is known to have blue chip firms and vintage industries.
NASDAQ is more volatile While NYSE is less volatile.
Also Read: All you need to know about the Nigerian Stock Exchange
How NASDAQ Stock Exchange works (Summary)
I am quite sure you got some knowledge about the two largest stock exchanges in the world (NASDAQ and NYSE) and also how stock exchange works.
Did you find this post insightful? Would you like to suggest a thing? Kindly use the comment box below, for your opinion and suggestions would be welcome.