Question

In 200 words or more, Explain how the NYSE and NASDAQ are organized and operate?

Answer 1

NYSE and NASDAQ are exchanges where securities are bought and sold with NYSE being no 1. in volume of trade followed by NASDAQ.

1. In NYSE there is a platform where trade of securities is executed on the floor physically through various members or specialist and market making in NYSE are through specialists who help in price discovery of various securities. They mainly operate through order flow which maintains customers’ orders to buy and sell securities. There are roughly 1400 members who help in execution of trade i NYSE. They are commission brokers, specialists, dealers, floor brokers and floor traders. It is basically a hue and cry based system
2. In NASDAQ all trades are executed electronically through computers and price discovery or market making is done through multiple market maker systems. All trades are automated here and hence its acronym is National Association of Securities Dealers Automated Quoted System. There is an OTC(Over the counter) System where dealer sell and buy stocks. Nasdaq operates through ECNs ( Electronically Controlled Networks) where investors can trade on stocks directly.

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