Understanding Stock Exchanges

Friday, May 24, 2013
The New York Stock Exchange (NYSE) is the largest and one of the oldest exchanges in the world. Founded in 1792 the NYSE is valued at nearly $13 trillion dollars. The NYSE is located on Wall Street and is the actual stock exchange that most people think of when they picture Wall Street trading. It has been featured in many films and is one of New York's largest tourist attractions. The NYSE operates in a auction-style modem with investors buying and selling stocks on the actual floor of the trading room.

NASDAQ

NASDAQ isn't a stock exchange exactly. It is actually a computerized version of an exchange dealing mostly in securities. Many companies are traded on the NASDAQ. The NASDAQ exchange is also located in New York and was the world's very first electronic market. NASDAQ has merged with the LSE, the AMEX and in 2007 acquired America's oldest exchange, the Philadelphia Stock Exchange. NASDAQ is one of the world's largest electronic stock markets. There are more than 3,000 companies listed and trading on the NASDAQ exchange.

AMEX

AMEX, or the American Stock Exchange has become the stock market for smaller companies. It used to be one of the main players in the exchange world but has since been relegated to a back seat position. After the Civil War AMEX was referred to as the New York Curb Exchange because traders operated and traded on the New York City streets.

The American Stock Exchange has passed through many hands over the last twenty years. It has been purchased by NASDAQ, merged with the NYSE Euronext market and had some of its electronic information integrated into other markets as well.

Foreign Exchanges

There are stock markets and exchanges all across the world. The only real requirement for a stock exchange to operate is that there must be publicly trading companies in willing to buy and sell stock.

Some investors prefer to trade in foreign markets because of the high price of the dollar. There are many stories of huge returns in foreign markets and for this reason many investors leave the American exchanges in hopes of doing better in the foreign markets.

It is important to remember that many foreign companies actually trade in the American exchanges as well. It is possible to trade in foreign companies without ever leaving a domestic market.

Many mutual funds also implement foreign stock into their portfolio. This stems from the idea of currency capitalization.

Now that you have had a brief overview of the different exchanges, you can now more easily differentiate between the major exchanges. Knowing how the markets work is an integral part of any investors arsenal.