The US stock market primarily makes use of two major exchanges, namely the New York Stock Exchange (NYSE) and the Nasdaq Stock Market (NASDAQ), and they happen to be two of the largest stock exchanges in the world.

However, despite their primary purpose being the same, they are quite different in terms of trading style, reputation, listing requirements, as well as companies. Together, they move trillions of dollars and host some of the biggest companies in the world.

So, what is the difference between NASDAQ and NYSE? Let’s learn more to know how they stack up against each other.

What is the NYSE?

NYSE is the older of the two, founded back in 1792. The exchange was formed under the Buttonwood Agreement, where four stockbrokers got together under a buttonwood tree (a sycamore) on Wall Street in New York City and decided to formalize the way they traded securities.

This was intended to take the chaos out of the process. As the years went by, the organization grew stronger and started calling itself the New York Stock & Exchange Board. They rented out a room at 40 Wall Street and began operating like a proper exchange, with rules, membership, and official trading hours.

Eventually, the name was shortened to the New York Stock Exchange, and by the late 1800s, it was already becoming the financial powerhouse we know today.

How Does it Work and Whom Does it Serve?

The NYSE is a marketplace, but it operates as an auction-based exchange where buyers and sellers can trade shares through brokers. The difference between NASDAQ and NYSE is that with NYSE, you can still deal with actual human brokers on the trading floor, but also electronically if that method is preferred.

It’s ideal for large and mature companies, often called blue-chip companies, like Coca-Cola, JPMorgan, and Nike. As you can assume from these examples, the companies listed here have had a long and upstanding financial performance, for the most part.

The listing requirements are strict, with companies needing to meet minimum earnings, revenue, and market value thresholds, which means it’s not easy to get in. Typical trading hours are 9:30 AM to 4:00 PM ET, Monday through Friday. Even though most trading is now digital, the floor is still active and plays a role during major market events.

What is the NASDAQ?

The NASDAQ (National Association of Securities Dealers Automated Quotations) is a younger exchange, launched in 1971. It’s the very first completely electronic stock market, which means there’s no physical trading floor. Today, it is home to some of the biggest tech companies in the world, such as Apple, Microsoft, Nvidia, and Meta.

The NASDAQ stock market is run by Nasdaq Inc., but they do much more than just operate a stock exchange platform. They also:

  • Sell technology to other stock exchanges around the world
  • Offer market data and analytics
  • Build software for risk management and regulatory compliance
  • Provide tools for trading, surveillance, and financial reporting

Consider them like a tech and finance hybrid, to put it in a nutshell.

How Does it Work and Whom Does it Serve?

The NYSE relies upon a single market maker, while the NASDAQ relies on multiple market makers who compete to provide the best bid and ask prices. It’s a system called a quote-driven market or dealer-based market. Trading on NASDAQ also runs from 9:30 AM to 4:00 PM ET, with pre-market and after-hours sessions available.

Being completely digital, it appeals to the fast-growing and tech-focused firms with lower listing fees and a digital system, which means it's a popular choice for startups and growth-stage companies.

How NASDAQ and NYSE Operate Differently

When a company decides to go public, meaning offering their shares to the public, they’re left with the question of where they should list themselves: NASDAQ or the NYSE. Both are the crème of the American stock market, but they work in very different ways.

This difference between NASDAQ and NYSE is what determines which one would be the smarter decision. Let’s break it down:

    • NASDAQ is more accessible for smaller or newer companies looking to go public.
    • The NYSE requires higher requirements, but comes with the prestigious factor and displays that a company has a solid track record.

Brand Perception

For those who aren’t active in the stock market, it might be surprising that being listed in a specific stock exchange actually impacts how your company is perceived, and public perception is of great concern to investors and their confidence.Companies that choose NASDAQ want to look like fast-growing, innovative, and tech-oriented companies. The NYSE, on the other hand, is seen as prestigious and reliable. Being listed in it showcases strength and stability.One isn’t necessarily better than the other, but they have their pros and cons. The decision largely comes down to companies and which exchange they feel fits their brand identity and goals better.

Market Makers Vs. Specialists

Let’s take the example of apples in a market (the fruit, not the company). NASDAQ uses multiple market makers, which means there are people always waiting to buy or sell apples. This makes the market much more active, meaning trades happen fast and prices, too, change quickly. So, with multiple firms (or market makers) competing to handle each stock, there is more liquidity and competition.The NYSE, on the other hand, uses one main designated market maker (DMM) per stock. A specialist is assigned to each stock, and they oversee trades, making sure there are no wild swings in price. It retains more control, even during times of chaos.

Listing Requirements: Who Can Get In

NASDAQ has a slightly lower barrier to entry, being more affordable, which is why it's preferred by startups and growing businesses. On the other hand, the NYSE, due to its prestigious image, is a little far off-rich for newer companies due to its listing requirements like higher revenue, market value, as well as shareholder numbers. Plus, their listing fee is outright higher.To put it in a nutshell:

Type of Companies: Tech Vs. Traditional

While this isn’t a necessity, generally, NASDAQ is known for listing tech giants like Apple, Amazon, Microsoft, and Google. In contrast, the NYSE is home to blue-chip companies, ones with a legacy, such as Coca-Cola, JPMorgan Chase, and Walmart.NASDAQ can be more tempting for startups and innovative companies due to its less strict listing requirements and digital approach. However, the NYSE is seen as more traditional, stable, and prestigious. The choice between the two matters greatly as it influences the brand image, which affects the kind of investors the company gets.

Type of Trading System

The trading system that these two utilize sets them apart. NASDAQ operates completely on digital systems, meaning every trade is done through computers. There is no physical trading floor present or human trade, called specialists or designated market makers, that are on their phones making trades. So, this is very unlike NYSE.However, NYSE, too, has kept up with the times and uses a hybrid model. Some trades are made electronically, but others are done traditionally.Being fully electronic, NASDAQ is faster and can be automated, but NYSE offers more hands-on control (literally) during big market moves.

All in all, the NYSE uses an auction market to set prices, while NASDAQ uses a dealer market. In the NYSE auction market, buyers and sellers submit competitive bids simultaneously. When the buyer's bid and the seller's request match, a transaction occurs. In the NASDAQ dealer market model, all prices are set by dealers.

Shared Features of NASDAQ and NYSE

So far, we’ve listed out the differences between NASDAQ and the NYSE, ranging from their styles of trading to their specialties, but they have a lot in common, too. At the end of the day, they are simply two stock exchanges. Let’s take a look at their similarities and see how they are more alike than you might think:

    • Companies that are listed in either of the two must share regular financial reports
    • Insider trading is illegal in both
    • They must follow rules about the transparency of risks and investor protection

Global Reach and Digital Trading

Despite NASDAQ being known as the digital exchange and NYSE continuing the historic and legendary trading floor, they’re both global powerhouses with highly advanced electronic systems.The trading floor is a fantastic nod to the NYSE’s roots and how things used to work back in the day. It also provides an advantage via human insight overlooking trades. However, there’s no surviving in today’s world without being available electronically, so the NYSE opted for a hybrid system in 2006. Now, from New York to Nairobi, investors can access real-time data, place trades, and monitor stock performance from a laptop or smartphone.
In a nutshell, geography and access to a building aren’t barriers anymore, as both exchanges are available online.

They Both Offer a Path to Going Public (Through IPOs)

An initial public offering, or IPO, refers to when a private company starts to sell its stocks and shares to the public, and it’s a huge milestone for any business. Both NASDAQ and the NYSE allow companies to go public, no matter if you’re a tech startup or a 100-year-old manufacturer of clothes. Either of the two exchanges can help you raise capital and open your shares to investors.
Naturally, and needless to say, the listing process, fees, and image that comes with being listed in either exchange differ greatly. However, fundamentally, they both give a company the opportunity to expand and reach the public.

They’re Both Regulated by the SEC

The SEC, short for Securities and Exchange Commission, is a US government agency that keeps track of the stock market, and both NASDAQ and the NYSE must follow the rules and regulations set by it. These rules are in place to protect investors and make sure everything is fair with no foul play.This also means:

Perception and Costs: Which Exchange Wins?

When it comes time for a company to choose between NYSE and NASDAQ, it’s definitely a milestone achievement because it means they’ll be going public. However, the decision is a massive one, as it impacts brand perception, investor appeal, and, of course, varies in terms of costs.

Let’s take a look at both options individually to analyse which one is a better fit for what type of company.

NYSE

NASDAQ

The New York Stock Exchange is old, traditional, and the most iconic exchange in the US.

The prestige it comes with is massive, no matter what cost it may come at. Clearly, household name brands like Coca-Cola, IBM, and McDonald’s agree with that sentiment.

Being listed on the NYSE carries weight and builds an almost automatic sense of reliability. For non-tech industries, such as finance or retail, the NYSE is seen as the gold standard. 

NASDAQ is the younger of the two, and that is reflected in its workings. It’s fully digital, with no physical trading floor and no human specialists managing stocks.

Due to its digital nature, it’s home to most of the tech giants like Apple, Amazon, and Google.

Most non-traditional businesses seem to gravitate towards it, feeling it is a more natural fit for their brand. And, of course, newer companies also prefer it due to the fact that it is cheaper to get listed and maintain your presence. It appeals to growth investors looking to invest in innovative, growth-oriented companies (which tech companies often are), explaining their majority presence on the NASDAQ.

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Closing Thoughts

Both the NYSE and NASDAQ shine in different aspects, and understanding their differences is the way to go about trading smartly and making well-thought-out investment decisions. Moreover, it’s also important to choose the right platform and broker that allows you to trade within both markets. XBTFX gives you access to both of the biggest equity markets in the world.

FAQs

Is it Better to be on NASDAQ or NYSE?

Both NASDAQ and NYSE are two of the largest US stock exchanges, but they operate quite differently. To say one is better than the other would be incorrect, as the answer is more gray than black or white. So, one isn’t better than the other, but a company may be a better fit for one over the other depending upon the company’s image, industry, and financial goals. More traditional and prestige-originated companies gravitate towards the NYSE, but most of the new tech-originated companies prefer the modern nature and workings of the NASDAQ. .