Course 102: The Stock Exchanges
In this course
1 Introduction
2 The New York Stock Exchange
3 Nasdaq
4 The American Stock Exchange
5 Regional Exchanges
6 Over-the-Counter (OTC) Stocks

Until recently, all of the biggest public companies in the United States were listed on the NYSE, and only second-tier companies traded elsewhere. Now, however, many of the largest companies in the U.S. trade on Nasdaq (National Association of Securities Dealers Automated Quotation system), an entirely computer-based system, which has become a serious rival to the New York Stock Exchange.

Nasdaq developed out of a network of brokers linked by telephone, which was formalized and linked by computer in 1971. Trading of Nasdaq stocks is done through brokerage firms, much as in the NYSE, but there is no trading floor. Instead, orders are sent out over a distributed network of thousands of computers, where "market makers" give the prices at which they are willing to buy and sell any specific stock. Once a price is agreed upon, the order is completed electronically. The number of shares traded on Nasdaq is now routinely higher than the number traded on the NYSE, which makes sense because Nasdaq has more stocks listed.

There are actually two levels of Nasdaq. The more prestigious of these is the Nasdaq National Market, with around 4,000 stocks. In order to be listed here, companies have to meet listing requirements that are similar to those for the NYSE; in fact, more than a quarter of the Nasdaq National Market stocks would qualify for listing on the NYSE but choose to trade on Nasdaq instead. These stocks include such big technology names as Microsoft MSFT, Intel INTC, and Cisco CSCO.

In addition, there's the Nasdaq SmallCap Market, containing about a third as many stocks as the National Market. As the name implies, this market is for stocks of companies that aren't big enough to meet the listing requirements of the major Nasdaq market, but that still want the prestige and liquidity of trading on a regulated market.

Next: The American Stock Exchange >>

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