The New York Stock Exchange (NYSE) is the largest and best known stock exchange in the world. In existence since 1972, the NYSE is located on Wall Street in New York, the unofficial financial capital of the world.
The NASDAQ is a far more recent entity, having been founded as merely an electronic quotation system in 1971 as the National Association of Securities Dealers Automated Quotations. Originally NASDAQ was the acronym for this full name; now the name itself has been changed to NASDAQ. Though also headquartered in New York, in a sense the NASDAQ isn’t located anywhere.
Which is perhaps the most significant difference between these two stock exchanges. Though it has become more computerized in recent years, the NYSE is a physical place where human beings trade stocks with each other. The NYSE is an auction market that uses floor traders and brokers trading their own accounts and trading as representatives of others, and specialists acting as market makers facilitating the trading of a given stock by buying and selling as needed to ensure a fair and orderly market in that stock.
Whereas the NASDAQ is an automated system of reporting over-the-counter stock trades. Its market makers facilitate the trading process by competing for customer orders by displaying buy and sell quotes for a guaranteed number of shares. The NASDAQ is a communications network of thousands of computers. For all intents and purposes it exists in cyberspace.
Other differences between the two:
* Though it’s very expensive to be listed on either, it’s more expensive to be listed on the NYSE.
* Though the requirements to be listed on either are stringent, they are more stringent for the NYSE. (This has gradually become less of a difference over time.)
* NASDAQ stocks tend, on average, to have more volatility than NYSE stocks.
* The NYSE is dominated by huge, old, established companies.
* The NASDAQ has some smaller and newer companies. In the past, the usual pattern was that companies would start off in the NASDAQ, and once they had progressed to where they could meet the requirements of the NYSE they’d obtain listing there. This has gradually become less common as the NASDAQ has grown, with more NASDAQ companies content to stay put.
* The NASDAQ is home to a disproportionate number of high tech companies, Internet-based companies, and other such “futuristic” enterprises.
Overall the differences between the NYSE and the NASDAQ are diminishing rather than increasing.