Current Thinking

Investing- New York Stock Exchange (NYSE) and NASDAQ

A blog by Frederic Slade, CFA, Assistant Vice President and Senior Director, Investments, Pentegra Retirement Services – December 1, 2016

From an investor standpoint, while there are differences between the New York Stock Exchange (NYSE) and NASDAQ, there are more similarities than one would think.

The NYSE, which was founded in 1792 under a Buttonwood tree, has continued to use human brokers and specialists on the exchange floor to execute trades for investors. However, a significant portion of NYSE stock is now traded electronically. On NASDAQ, which was founded in 1971, trading is computer based. Both exchanges look to match buyers and sellers of a stock. The exchanges have huge volumes; NASDAQ trades approximately two billion shares daily and NYSE trades one billion per day.

Financial requirements for listing on either exchange are similar. For example, NASDAQ requires companies to have pretax earnings of at least $11 million over the past three years while NYSE requires at least $10 million in pretax earnings over the prior three years.

While the NYSE is larger and lists more established companies, NASDAQ costs much less than NYSE to list its stock (up to 70%-80% less). Therefore, it is not surprising that smaller, growth oriented companies as well as Initial Public Offerings (IPOs) may be found on NASDAQ. Note however, that Apple and Microsoft, two NASDAQ stocks, have become two of the largest stocks in the S&P 500 Index.

The main difference between the two exchanges is ultimately one of perception. The NASDAQ has a more modern image with its electronic trading platform and concentration of technology companies. The NYSE has traditionally listed the largest companies (e.g. General Electric, Exxon Mobil) and continues to ring its trading floor bell each day. From an investor standpoint, it makes the most sense to focus on the company itself, not the exchange on which it is traded.

NOTE: Information presented herein is for discussion and illustrative purposes only and is not a recommendation or an offer or solicitation to buy or sell any securities. Past performance is not a guarantee of future results.


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