Talk

Stock Markets

A quick overview of the different markets and what they cater to.

The NYSE is the oldest stock exchange in the country. It started, when a group of traders exchanged stocks under a buttonwood tree on Broad Street N.Y. The NYSE then moved to its current location on 18. Broad Street.

In order to be listed on the NYSE a company needs to have:

1. atleast $40 million in tangible assets
2. atleast 2 outside directors (and an audit committee)
3. atleast 2 years of positive earnings (this is a flexible requirement).

Trades at the NYSE are performed via the public out-cry method where the traders quote prices till parties are in agreement. Traders meet at a trading post for a stock on the exchange floor. Current chief Dick Grasso is often credited with the resurgence of the NYSE in recent years.

The National Association of Securities Dealers Automated Quotation System NASDAQ was then formally founded in 1971. It originally began as an agreement to exchange trades over the telephone. Now all trades are performed electronically with no physical trading floor. There two NASDAQ levels. The National Market trades about 4,000 premium stocks with many qualifying to trade at the NYSE but choosing to remain with the NASDAQ. The Small Cap markets provides the prestige of trading at a regulated exchange for smaller companies.

The American Stock Exchange or AMEX began as an informal gathering of brokers meeting outside the NYSE to trade stocks that could not gain entry to the NYSE. The National Association of Securities Dealers then bought Amex and combined the two markets into NASDAQ-Amex market group. Amex now plays a role in trading derivatives and options.

Regional Exchanges: The US also has several regiional exchanges (Boston Stock Exchange, Philadelphia stock exchange, etc) to handle smaller companies at the local scene. However these exchanges also tend to deal with options and derivatives.

Finally stocks that once listed at the premier exchanges and fell out of favor and ended up no longer meeting the minimum requirements end up trading OTC (Over the Counter). These stocks also go by the name pink-sheet stocks. A vestige of the days when OTC stocks were listed on a pink piece of paper.