Home  >  Newsletters  >  Consumer Law  >  What is a Stock Exchange?

What is a Stock Exchange?

The phrase actually has a dual meaning. First, it refers to the trading of stock between buyers and sellers. Second, it refers to the place where such transactions take place. A stock exchange may be housed in a building or, in the alternative, it may be a computer-driven network.

The New York Stock Exchange (NYSE) is one of the most widely recognized stock exchanges. The NYSE is the largest, as well as the oldest, stock exchange in the United States. Trading on the NYSE takes place on a large trading floor. On the trading floor, representatives of various brokerage firms engage in auction style trading. In order for a stock to meet the requirements for trading on the NYSE, it must first meet certain requirements, including: minimum listing requirements, a specified amount of market capitalization, and other requirements. Even if a company meets the requirements for listing on the NYSE, the company is not guaranteed a spot on the exchange. Once a company meets the requirements, the NYSE makes the determination as to whether to list the company after it makes a careful examination to ensure the stability of the company. On the NYSE, trading begins promptly at 9:30 a.m. EST. The day ends at 4:00 p.m. when the well is rung from the podium.

The American Stock Exchange (AMEX) first began as an alternative to the NYSE. The AMEX operates in a manner similar to the NYSE with trading taking place in a physical location. Generally speaking, the AMEX lists the stock of mid-cap and small-cap companies, whose stock fails to meet the strict requirements for listing on the NASDAQ.

In 1971, the world’s first electronic market opened. It is known as NASDAQ (short for the National Association of Securities Dealers Automated Quotation System). On NASDAQ, thousands of shares of stock are traded each day by way of computer and telephone. The style of trading in place on NASDAQ is an open market system, with multiple dealers. NASDAQ is unique among the major United Stock exchanges in that it does not have a physical trading floor where buyers and sellers come together.

In addition to the major United States stock exchanges, there are a handful of regional exchanges in operation in the United States, including: the Boston Stock Exchange, the Chicago Stock Exchange, the Pacific Stock Exchange, and the Cincinnati Stock Exchange.

Furthermore, there are stock exchanges in operation in foreign countries as well. They include: the Geneva (Swiss) Stock Exchange, the London Stock Exchange, the Helsinki Stock Exchange, the Nikkei Stock Exchange in Japan, the New Zealand Stock Exchange, the Australian Stock Exchange, the Tel Aviv Stock Exchange, and many others.

As Seen On...
9.5Russell Van Beustring