What Is The  Difference Between NASDAQ And New York Stock Exchange

T he New York Stock Exchange (NYSE) and the NASDAQ Stock Market (NASDAQ) are major stock exchanges in the United States. Founded in 1792 and 1971, respectively, both have been instrumental in innovations in the financial markets. But what exactly is the difference between NASDAQ and New York Stock Exchange?

Though the NYSE and the NASDAQ are in direct competition, you should be aware of the differences between NASDAQ and New York Stock Exchange because of the amount of trading volume that goes through them.

Trading Mode

In recent decades, it has been widely debated the main difference between NASDAQ and NYSE. The answer to that question lies in the way trades are executed.

The New York Stock Exchange (NYSE) primarily operates an auction market where traders buy and sell at agreed-upon prices set by their orders. All NYSE stocks are publicly traded on a first-come, first-served basis; the price at which your stock is sold is solely up to the person doing the buying — there are no pre-set prices, which means each buyer has total control over overpricing.

In the case of NASDAQ, it works a little differently as it is a dealer market. This means that no central counterparty matches buy and sell orders from participants directly amongst each other. Still, this task is accomplished by market makers who provide liquidity to find an offsetting buyer or seller for a stock's transaction.

Transaction Location

Understanding the transaction location of both exchanges is crucial to managing your investment portfolio.

The New York Stock Exchange has been around for over 200 years, and it has seen its fair share of ups and downs. Nowadays, the exchange is primarily a computerized market, but it retains a physical trading floor. The rest of the data center's operations have been moved to the data center at Mahwah in New Jersey to keep up with the increasing demand for faster processing speeds.

NASDAQ is an electronic stock market that does not have a physical trading floor. Instead, it operates under rules designed to protect investors while encouraging capital formation and fair trading.

Equities Listing

The NYSE has laid the groundwork for traders and investors to succeed in today's modern market. It is genuinely the first port of call for all companies when they decide to issue stock publicly. Moreover, with more than 280 listed companies, it is home to many blue-chip and well-known companies.

The NASDAQ is the hub of several high-tech companies and a range of biotechnology stocks. As a result, NASDAQ stocks are perceived to be riskier than those on the New York Stock Exchange (NYSE). In addition, Internet giants like Facebook and Google are also listed on the NASDAQ exchange.

Listing Fees

While the New York Stock Exchange (NYSE) and the NASDAQ trade on different markets, focusing on different types of companies, they both charge listing fees to companies looking to be traded.

Unlike the NYSE, however, NASDAQ is cheaper for companies looking for an alternative to being listed on an exchange. This is because NASDAQ’s fees are capped at $159,000 while the NYSE charges $500,000.

Traffic Control

A specialist on the NYSE is a designated member of the exchange that makes a market in a stock. Specialists help maintain market stability and liquidity, as they must make a firm bid and ask price for their assigned stocks. This helps eliminate wide spreads, which drives up-to-date prices to their quotations.

On the other hand, market makers continually track trading patterns, provide quotes and execute trades at NASDAQ. In addition, more than 270 market-making companies on NASDAQ offer liquidity, thus keeping markets stable. As a result, these firms are considered the heart of the stock market.

Which Exchange To Choose?

If you're looking to increase your portfolio's performance, you probably wonder which stock exchange you should invest in. Neither the NYSE nor the NASDAQ is inherently better or worse than the other; it comes down to personal preference and what is most profitable for you.

The NYSE may be your best bet for a more stable investment without much risk. The NASDAQ offers the opportunity for higher returns, but it comes with a greater level of risk.

This article has touched on the difference between NASDAQ and New York Stock Exchange. When considering either exchange, it's essential to do your research and know that each has pros and cons before investing.