Nasdaq and the New York Stock Exchange are both stock exchanges headquartered in New York City. While the New York Stock Exchange is iconic and practically synonymous with Wall Street, Nasdaq has come into its own as a tech powerhouse. There are structural differences between the two exchanges, but these differences don't substantially affect the buying and selling processes for the individual investor.
Throngs of Shouting Brokers Are Gone
One major difference is historical. Nasdaq has never featured a trading floor. It was founded in 1971 as an electronic trading stock market. For most of the NYSE's history, however, all trades took place on the floor of the exchange in New York. Americans were familiar with scenes of clusters of frantic brokers shouting orders, waving sheets of paper and flashing numbers with their fingers. Those wild scenes are history. The NYSE is now a hybrid market, with a few stocks trading on the floor, but the majority done electronically.
New Blue Chippers
Another difference between the two exchanges involves the kinds of companies that list with them. The NYSE is loaded with big industrial companies and other blue chip corporations that have been around for a long time and are household words.
Nasdaq is known as a high-tech market and its companies generally are younger and considered more volatile. Facebook, for example, recently had its newsy initial public offering with Nasdaq. But this distinction between the two exchanges is not as pronounced as it used to be. Some tech companies listed on Nasdaq, such as Apple, Microsoft and Yahoo, have long held household-word status, dispelling the notion that Nasdaq companies are upstarts and cowboys. In fact, in 2012 Apple became the biggest corporation in American history as defined by stock market value.
Competition to list tech companies such as Facebook, Zillow and LinkedIn has gotten more intense as Nasdaq's standing has grown.
Different Trading Systems
While the NYSE is primarily an auction market, the Nasdaq is a dealer's market. With an auction market, ivestors -- through their brokers -- tend to be trading with other investors. In a dealer's market the investors trade through dealers called market makers. With an auction system, there's competitive bidding, and the brokers negotiate on behalf of buyers and sellers.
These procedural differences don't substantially affect the individual investor. To buy or sell on either exchange, an individual investor establishes an account with a broker who makes the trades.
While both exchanges are public companies and both are headquartered in New York, since 2007 the NYSE has had a somewhat more international flavor than Nasdaq. In 2007, the NYSE merged with Euronext, operator of exchanges in Europe, to become NYSE Euronext. Nasdaq also has a European presence through Nasdaq OMX.
- Library of Congress: History of the American and NASDAQ Stock Exchanges
- The Wall Street Journal: Apple Now Biggest-Ever U.S. Company
- The Wall Street Journal: NYSE, Nasdaq in Facebook Faceoff
- The Wall Street Journal: NYSE Gaining Ground on Nasdaq in IPO Race
- Chicago Tribune: Know The Differences Between Nyse And Nasdaq
- USA Today: NYSE or Nasdaq? The Whys of Where a Stock's Listed
Sheila Mason has been a writer and editor for more than 20 years. She has worked in the translation field, handling technical manuals for Fortune 500 companies such as Siemens, and served as nation/world editor at the "Wisconsin State Journal." Mason has also contributed business, academic and medical writing to the University of Notre Dame and the Medical College of Wisconsin.