NYSE and NASDAQ – two largest stock exchanges in the world

When I started trading on US Stock Markets, I associated such words as NYSE and NASDAQ. I had no clue about the existence of any other markets. And as it turned out there are AMEX, as well as Pink Sheets and OTC-BB. A few years ago AMEX was taken over by NYSE.

What differences divide individual stock exchanges? Which of the markets I think that are “better” when you beginning trading? Which of them offer more possibility in daytrading strategy? To those and other questions I will answer below! Today I will focus on NYSE and NASDAQ.

What is the difference between NYSE and NASDAQ?

Why to create a few parallel markets, since everything could be simpler and listed on one market. Of course, why not! But in this moment it is necessary to dig deep into the history of individual stock exchanges formation.

I would like to save you from digging deep and a little bit boring history – therefore I will place only a few links to materials, in which you will find the history of individual stock exchanges formation.

History of NYSE stock exchange: read

History of NASDAQ stock exchange: read

I will focus on presentation of differences that are important from the trader point of view and selection of companies. However, it is worthwhile to get familiar how individual stock exchanges work, in order to better understand and use differences which divide them.

Two largest stock exchanges in the world: NYSE and NASDAQ

Both NASDAQ and NYSE are located in New York. Difference between is above all:

• Capitalization
• Type of companies quoted on each of them

NYSE is a stock exchange about long history and larger capitalization. It is automated stock exchange, but there is so-called specialist who monitors concluded transactions (his role drastically diminished since there is a possibility to conclude transactions via Electronic Communication Networks). Probably many of you have seen in movies from New York floor where traders outshout another. This trading floor still exists, however realization of orders is already automated.

NASDAQ specializes above all in companies from the technological sector. There are listed among others Facebook or Groupon. Technological companies are its domain; however it has been heavily disturbed after controversial technological debut of Facebook. For reminding: debut of the company on emission date was repeatedly transferred; gigantic number of placed orders by traders hung for a long time after opening quotations of the company (a part wasn’t carried out for many days).

Technical disaster ended the debut of Facebook. This prompted other great company to suspend NYSE … Debuts of such technology companies as Twitter or Alibaba was on NYSE stock-market.

Below recording presents Facebook debut on the stock-market – with visible hanged orders:

It is worthwhile to recall that for companies more comfortably is to debut on NASDAQ, both for formal and financial reasons: it is a cheaper solution.

Symbols of companies quoted on NYSE and NASDAQ

This may surprise some of you, but it is assumed that companies quoted on NASDAQ have symbols that consist in majority of four letters, e.g. MSFT (Microsoft), SIRI (Sirius), EBAY (eBay).

Companies quoted on NYSE usually consist of one, two or three letters. Of course, it isn’t a rule, there are sometimes exceptions – it is worth mention about one of the greatest debuts in the history i.e. BABA (Alibaba), which is listed on NYSE, but its symbol consists of four letters.

Differences in quoting of companies from NYSE and NASDAQ

Quoting from pre-market (hours before regular trading session) and from the regular session. First of all the difference occurs on NYSE, where specialist opens at 3:30 pm. Before 3:30 pm it is possible to observe it on quoting, however doesn’t take part in the trade (therefore a perfect solution for traders is the possibility to filter on quotes window, so you can exclude it in pre-market).

NYSE – quoting before session (pre market; excluded specialist from the window Level II):

NYSE – quoting during regular hours:

NYSE AMEX – quoting during regular hours:

NASDAQ – quoting before the session (pre market)

NASDAQ – quoting during regular hours:

As you can see the Quoting fundamentally look almost the same. A main difference is a lack of NYSE/NYB specialist on NASDAQ and AMEX, as well as lack of ECN AMEX on NASDAQ and NYSE. I marked them on individual windows with a red square. The second difference is definitely a low number of orders on Level II during pre-market – in the trade before session.

What NYSE is characterized by?

Taking into account the formal requirements for the company to be quoted on NYSE:

• Costs

• Regulations

Quoting on this stock exchange for the company is more ennoble. From my point of view, for the vast majority of companies listed on NYSE are foundations. Fluctuations in prices accelerated by investors have real reflection in the company evaluation (what doesn’t mean that – currently on the state of April 2015 – I think that they have a low evaluation – just opposite the market is much pumped up).

I recommend NYSE stock exchange to traders who start the adventure on US Stock Markets. Companies quoted on it are less chaotic. What I mean by that:

• aveage true range on companies are lower

• definitely a smaller number of pumped companies (so-called Pump and Dumps), which I don’t recommend beginners

• companies quoted on it have larger bases for fundamental analysis

What NASDAQ is characterized by?

NASDAQ due to the fact that is focused above all on technological companies, it has greater changeability. Let’s be honest, evaluations of the gigantic number of companies are simply cosmic. Five largest companies quoted on NASDAQ have total market capitalization of close to 2 billion dollars!

Due to simplified formalities and definitely lower costs – on NASDAQ we have a gigantic number of companies which practically don’t produce anything, and their rate is conditional to media publications and emotions by which traders or investors are guided.

The effect of this is a substantial number of companies (in relation to NYSE), which are removed from the stock exchange:

• delisted to Pink Sheets or OTC-BB

• go bankrupt

Take a look at the following charts of companies and price fluctuations that are characteristic for them. This is a typical pump and dump – i.e. campaign which is aimed to push the price of the company after it is dramatically collapse. I can place a lot of identical looking graphs. For this reason, the NASDAQ I also recommend above all traders who developed already own trading style or who attach great significance to the risk management. Changeability on the gigantic number of companies on NASDAQ is simply definitely greater, so for the beginners it may constitute too big risk at the beginning.

Summary of the differences among stock exchanges

In the following Table I collected most important, most characteristic differences among individual stock exchanges.

If only just start the adventure on American stock exchanges – share this article with your friends, maybe you will encourage them to start trading on the major stock exchanges of the world! If you have some questions – feel free to add a comment below.