There are countless stock exchanges in the world, many of which are irrelevant to the global economy. There are also two exchanges that confuse the entire global economy when these trading platforms are doing badly: the New York Stock Exchange (NYSE) and the Nasdaq. These two exchanges account for the majority of global stock trading and almost all North American stock trading. At the same time, the NYSE and Nasdaq differ in the way they operate and the types of stock traded here. Shares on both exchanges can be bought and sold directly via the AGORA Berlin trading app.
The New York Stock Exchange (NYSE), headquartered in New York, is the oldest US stock exchange and the largest stock exchange in the world by total stock market capitalization of listed securities. Nasdaq is a global electronic marketplace for buying and trading securities, listing many of the world’s technology giants – including Apple and Google. The NYSE is an auction market where professionals operate (called “appointed market makers”), while the Nasdaq is a dealer market where multiple brokers compete.
Excited or desperate stock traders often shaped the image of trading floors until they were replaced by e-commerce. While the NYSE still has a physical trading floor on Wall Street in New York City, the vast majority of transactions are conducted through the Mahwah, NJ data center. The Nasdaq, on the other hand, does not have a physical dance floor. In the data centers of both exchanges, trading takes place directly between investors looking to buy or sell and the market makers.
Who are the “Market Makers” and “Designated Market Makers”?
Both Nasdaq and NYSE use “market makers” to improve liquidity and maintain a fair and orderly market. However, there are differences in the responsibilities these professionals have on the two exchanges.
On the Nasdaq, “market makers” hold stocks to buy and sell from their own accounts in transactions with individuals and other traders. Market makers always quote two prices: the buying price and the selling price of the security for which the market is thus created. More than 260 such market maker firms provide liquidity to the stocks listed on the Nasdaq. This competition helps provide buyers and sellers with the best prices.
On the NYSE, market pricing is provided by Designated Market Makers (DMMs), formerly referred to as “specialists.” DMMs have more responsibilities than traditional market makers. You are the point of contact for a publicly traded company on the NYSE. DMMs provide stability by taking the other side of the trade in times of imbalance: buying when investors sell, and vice versa. They conduct opening and closing auctions and use both human analysis and estimation as well as algorithms for the valuation of individual shares.
NYSE and Nasdaq – Traditional and newcomer friendly
The images of the NYSE and Nasdaq are still very different today, though not as distinct as they were 20 years ago. Known for technology and innovation, the Nasdaq is home to digital technology, biotechnology, and other companies that excel in innovation. Therefore, stocks listed on the Nasdaq are considered growth oriented, but also more volatile: there may be stronger upward or downward fluctuations. On the other hand, companies listed on the NYSE are perceived as more stable and well-established. The NYSE attracts blue chips and industrial companies, many of which have been around for generations.
However, many of the NASDAQ young tech companies have now turned into industrial giants, surpassing the importance of the NYSE companies. Finally, public companies such as Apple, Google, Microsoft, Meta (formerly Facebook), Amazon and Intel are listed on the NASDAQ. But NASDAQ continues its tradition as a stock exchange for young companies. With direct listing, which is only possible there, the sale of the company’s shares can be started much cheaper than, for example, with an IPO on the NYSE. Therefore, it is worth paying attention to companies that start at NASDAQ and, for example, enter cautiously through trading platforms such as AGORA direct: Companies are early in their careers at AG, but have been thoroughly checked by the US financial regulator. And the stock exchange itself is not interested in issuing airline numbers, like the scandalous German company Wirecard, which the Frankfurt Stock Exchange regulator has identified as questionable long after the criminal activity was reported by British financial newspapers.