The New York Stock Exchange (NYSE) and the Nasdaq Stock Market (NASDAQ) are the two largest stock exchanges in the world. Both are based in New York City and provide a trading platform for securities. Despite their similarities in size and purpose, there are notable differences in the types of equities listed, the listing requirements, how each exchange operates, and the trading process.

Histories of the Exchanges

The NYSE is the largest stock exchange in the world, with a market capitalization of approximately $25 trillion. It came into existencde in 1792 upon signing of the Buttonwood Agreement. The Buttonwood Agreement was drafted by 24 brokers under a buttonwood tree outside the address 68 Wall Street in Lower Manhattan. Before the agreement put the world’s earliest recorded securities exchange into effect, early traders had gathered at that location to exchange goods in an informal manner.

The NYSE is currently owned by Intercontinental Exchange, a holding company that owns and operates a number of exchanges, clearing houses, and data service providers. Intercontinental Exchange is a Fortune 500 company that trades with the ticker symbol “ICE” on the NYSE. Stacey Cunningham serves as President of the NYSE Group and Jeff Sprecher serves as Chairman and CEO of Intercontinental Exchange.

In contrast to the long history of the NYSE, NASDAQ has only been in existence since 1971. The National Association of Securities Dealers (NASD), which is now known as the Financial Industry Regulatory Authority (FINRA), founded NASDAQ. NASDAQ is the world’s first electronic exchange. NASDAQ has a market capitalization of approximately $16 trillion.

Trading Locations

The location of trading is another feature that distinguishes the two stock exchanges. The NYSE retains a physical trading floor on Wall Street, but also conducts a significant portion of trades electronically using its data center located in Mahwah, New Jersey. The NASDAQ does not have a physical trading floor and conducts all trading electronically.

NYSE as Auction Market; NASDAQ as Dealer Market

The NYSE is an auction market while NASDAQ is a dealer market. This makes a difference in how market participants interact with one another. Under the auction method, market participants directly buy and sell from each other. The implication of having an auction market is that buyers and sellers enter competitive bids simultaneously. Execution of a stock trade reflects the highest bidding price paired with the lowest asking price.

The structuring of NASDAQ as a dealer market means that market participants do not directly buy and sell from each other, but rather transact via a dealer. These dealers are known as “market makers”. The market-making firm, which is usually a brokerage company or bank, electronically matches up buyers and sellers very swiftly.

NYSE & NASDAQ Traffic Control

At the NYSE, designated market makers (DMMs) or specialists are responsible for maintaining market stability and liquidity. There is usually a specialist per listed company, who should be ready to buy or sell the company’s shares when imbalances occur. They also run the opening and closing auctions.

Market makers at NASDAQ maintain inventories of different stocks that they buy and sell from their own accounts. There are more than 260 market-making firms that help promote efficient markets and maintain liquidity of NASDAQ-listed stocks.

Types of Equities Listed

The NYSE is known for listing the stock of traditional blue chip and industrial companies. The NASDAQ is home to a number of Internet, biotechnology, and other companies in growth-oriented sectors. As a result, stocks on the NASDAQ have higher volatility. Currently, there are around 2,800 companies listed on the NYSE. There are around 3,300 companies listed on NASDAQ.

Companies with stocks listed on NASDAQ include recent top-performers such as Apple, Microsoft, Amazon, Cisco Systems, Amgen, and Gilead Sciences. The NYSE lists a number of blue chip and lower volatility stocks such as Boeing, Berkshire Hathaway, Visa, Walmart, and Exxon Mobil.

Listing Fees

One significant way NYSE and NASDAQ generate revenue is by collecting listing fees from companies. Although both exchanges charge based on a given company’s number of outstanding shares, NASDAQ is generally cheaper for companies. NASDAQ’s fees are generally capped at $159,000 while the NYSE allows fees up to a maximum of $500,000.

NASDAQ Overtook NYSE in IPOs

As a result of the coronavirus pandemic, NASDAQ has overtaken NYSE in the number of IPOs in 2020. The NYSE has traditionally attracted more large-scale listings than NASDAQ. As of June 2020, companies going public raised $12.2 billion from IPOs on NASDAQ. In comparison, companies raised $10.9 billion on the NYSE in the first half of 2020. However, looking at the total capital raised via IPOs is a narrow metric. When looking at the total capital raised more broadly to include follow-on offerings by listed companies and new listings of pooled asset portfolios called closed-end funds, the NYSE remains ahead of NASDAQ in 2020.

Private vs. Public

Historically, only NASDAQ was listed as a public company while the NYSE was a privately traded corporation. In 2006, the NYSE went public after operating as a not-for-profit exchange since its inception in 1792. As publicly traded corporations, both the NYSE and NASDAQ must comply with the public company reporting requirements laid out by the Securities and Exchange Commission. The shares of NASDAQ and NYSE are available to traders on its respective exchange platform.