What does a stock exchange do?
An exchange runs a marketplace. It collects buy and sell orders in an order book, matches them by price and then by time, publishes quotes and trades, and runs the opening and closing auctions that set the official open and close of the stocks it lists. It also lists companies: a company that meets its standards and pays its fees can have its shares admitted there.
US exchanges are overseen by the Securities and Exchange Commission (SEC). They don’t hold your account; your broker does, and it sends your orders to the market. For how a price forms inside the order book, see stock market for beginners.
NYSE vs Nasdaq: the key differences
The New York Stock Exchange traces its roots to 1792 and the Buttonwood Agreement signed on Wall Street. It still has a trading floor, where a designated market maker is assigned to each listed stock and helps run its opening and closing auctions. Nasdaq opened in 1971 as the first electronic stock market: no floor, and many market makers competing to quote each stock.
Reputation differs more than mechanics. Nasdaq is associated with technology and growth companies, the NYSE with long-established industrial, financial and consumer names, but both list companies from every sector, and some companies have moved from one to the other. Each sets its own listing standards and fees, which matter to companies far more than to investors.
- Listing
- Admission of a company’s shares to an exchange that it meets the standards of. The listing exchange runs the official auctions for the stock, but the shares trade on many venues.
- Designated market maker (DMM)
- At the NYSE, the firm assigned to each listed stock to help keep trading orderly and to run its opening and closing auctions. It took over the role of the old floor specialist.
- Market maker
- A firm that keeps posting both a bid and an ask in a stock and earns the spread when both sides fill. Nasdaq stocks have several competing market makers.
Auction vs dealer market: how they worked historically
The NYSE grew up as an auction market: buyers and sellers, through brokers on the floor, met at one post for each stock, where a specialist matched them at a single price, as on the left of the drawing below. Nasdaq was a dealer market: several dealers each showed their own bid and ask on screens, and you traded with whoever quoted the best price, as on the right.
Today the line has faded. Both run electronic order books in which any limit order can set the best price, both have market makers, and both run opening and closing auctions. The NYSE floor still operates, but most trading on both exchanges is matched by computers.
Do NYSE and Nasdaq have the same trading hours?
Yes. Both run the regular session from 9:30 a.m. to 4:00 p.m. Eastern Time, Monday to Friday, with the same holiday calendar and early closes, and both offer extended-hours trading on their electronic markets. US stock market hours converts these hours to Gulf time and lists the holidays. Saudi shares follow a separate schedule on Tadawul: see Saudi stock market hours.
What does “listed on NYSE or Nasdaq” change for you?
Almost nothing. Any US broker can buy any listed stock; you don’t choose the exchange, and the price, hours and order types are the same. The length of the ticker symbol once hinted at the exchange, but it is no longer a reliable clue. What affects your result is the stock’s liquidity and spread, not its listing.
The listing matters in a few places: the listing exchange runs the official opening and closing auctions for its stocks; its rules apply to the company, including minimum price standards that can end in delisting; and some indexes depend on it, since the Nasdaq-100 only admits Nasdaq-listed companies. Stock market indexes explains how those baskets are built.
Where does your order actually go? Exchanges, wholesalers and dark pools
“Listed on” does not mean “traded only on”. A NYSE-listed stock also trades on Nasdaq’s market and on other US exchanges, and much of the volume trades away from exchanges: at wholesalers, firms that fill many retail orders themselves, and in dark pools, trading systems that don’t display their orders. Your broker picks the route, as in the drawing below, and must seek the best execution reasonably available.
Wherever it fills, every trade is reported to the consolidated tape, the public record of prices and volume that charts are built from, and US rules generally prevent trades at prices worse than the best quotes displayed on the exchanges. Your real cost is the spread and any slippage: see bid-ask spread and order types. If you plan to day trade, day trading for beginners covers what to trade and when.