A stock exchange is a marketplace where investors buy and sell securities, commodities, derivatives and other financial instruments. Earlier, brokers and traders used to physically meet at the stock exchange to trade stocks. Today most financial trading happens electronically and automatically through stock exchanges. There are many stock exchanges across the world. Let’s look at the major US Stock exchanges.
Major Stock Exchanges in US
The two major stock exchanges in the US are NYSE and NASDAQ
1. New York Stock Exchange (NYSE)
NYSE is the world’s largest stock exchange based on market capitalization. It was founded in 1792 and is located in downtown Manhattan in New York City. This exchange was merged with the European Stock Exchange, known as Euronext, to form what is currently known as NYSE Euronext in 2007. However, Intercontinental Exchange (ICE) owns the NYSE after purchasing the exchange in 2013.
NYSE lists more than 2,500 stocks and also includes many US blue chip companies. To be listed on NYSE, a company must have 400 shareholders and 1.1 million outstanding shares. Also, this exchange is known as the Big Board as it consists of one floor for equities and another for NYSE American options exchange.
For many years NYSE relied on floor trading using the open outcry system. Today, most trades have transitioned to electronic systems, which rely mainly on market makers to conduct both physical and automated trading activity. The quotes offered by market makers are at par with floor traders and other market participants.
2. National Association of Securities Dealers Automated Quotations (NASDAQ)
NASDAQ is the world’s second-largest exchange. It was founded in the year 1971 as the first electronic exchange and was the first to use computers to match buyers and sellers. Furthermore, in the year 2006, it separated from the National Association of Securities Dealers to become its own publicly traded company. Today, NASDAQ has become the global electronic marketplace for trading securities. Also, it lists more than 3,300 companies where the world’s largest technology companies are listed – Apple, Amazon, Google, etc. Currently, NASDAQ operates 29 markets, one clearinghouse, and five central securities depositories in the United States and Europe.
Even though NYSE has the largest market capitalization, NASDAQ has the distinction of having more companies listed. Also, being a completely electronic exchange, it has relatively modern infrastructure, proprietary electronic systems, and lower listing fees. This makes it popular among investors and also favourable for start-ups due to relaxed listing requirements and regulations.
Other Stock Exchanges in the US
There are other exchanges that exist in the US based on the city they are located in –
1. Boston Stock Exchange (BSE)
The Boston Stock Exchange is the third oldest exchange in the US which was founded in 1834. As the name implies, this is a regional exchange in Boston, Massachusetts. This exchange comprises Boston Equities Exchange (BEX) and the Boston Options Exchange (BOX) and was acquired by Nasdaq in 2007.
2. Chicago Options Exchange (CBOE)
The Chicago Board Options Exchange is the largest options exchange in the US, where it offers options across 2,200 companies, 22 stock indices, and 140 exchange-traded funds. CBOE was established in 1973 in Chicago and began its first trading on April 26, 1973. Also, CBOE is the originator of the CBOE Volatility Index (VIX), the most widely used and recognized proxy for market volatility.
3. Chicago Board of Trade (CBOT)
The Chicago Board of Trade is the world’s oldest commodity exchange, established in 1848. CBOT initially traded only in agricultural commodities such as wheat, corn and soybeans. Currently, it offers options and futures contracts across all products like gold, silver, US treasury bonds and energy. Also, this exchange is owned and run by CME Group Inc.
4. Chicago Mercantile Exchange (CME)
Chicago Mercantile Exchange also referred to as ‘the Chicago Merc’, is a global derivatives marketplace based in Chicago. It was founded in 1898 as an agricultural commodities exchange, a non-profit organization. Later in 2007, it merged with CBOT to become a designated contract market of CME Group. In 2008, CME, CBOT, NYMEX and COMEX were markets which got approved by CME Group Inc. Today, CME is the most extensive options and futures contracts open interests exchange of any futures exchange in the world. Furthermore, CME trades several types of financial instruments: interest rates, equities, currencies, and commodities.
5. NYSE Chicago
NYSE Chicago is a stock exchange based in Chicago, Illinois, formerly known as Chicago Stock Exchange (CHX). Intercontinental Exchange (ICE) acquired CHX in July 2018 and rebranded the exchange as NYSE Chicago in 2019. This exchange is a national securities exchange and a self-regulatory organization. Also, it operates under the US Securities and Exchange Commission (SEC) guidelines.
6. International Securities Exchange (ISE)
The International Securities Exchange is an electronic exchange that includes ISE Options Exchange and the ISE Stock Exchange. The exchange was launched in 2000 with the aim to provide investors with greater liquidity and the ability to perform transactions quickly. In 2016, ISE became a wholly owned subsidiary of NASDAQ. Today NASDAQ ISE offers investors trading in more than 3000 companies’ equities, indexes and exchange-traded funds.
7. Miami Stock Exchange (MS4X)
The Miami Stock Exchange is a regional exchange that offers trading in equities, currency and futures. It is based in Miami, Florida, a hub for trading services for the G27, which refers to the 27 Latin American and Caribbean Exchanges. This exchange offers all investors a full range of trading, processing and distribution services.
8. National Stock Exchange (NSX)
The National Stock Exchange was the first stock exchange for moving to 100% electronic trading. It was founded in the year 1885 and is currently based in Jersey City, New Jersey. However, in 2017, NSX was acquired by the NYSE and is now known as NYSE National.
9. Philadelphia Stock Exchange (PHLX)
Philadelphia Stock Exchange is now known as NASDAQ OMX PHLX after NASDAQ purchased it in 2008. PHLX is one of the oldest exchanges in the US and was the first securities exchange formed in 1790. Also, it was the first to embrace electronic trading and introduced a stock order routing and execution system called PACE. Currently, it focuses on options trading rather than on equities. It trades more than 2600 US dollar-settled options, sector index options, and equity options.
Frequently Asked Questions
It is a marketplace where shares of publicly listed companies are traded. It is a platform where buyers and sellers come together to trade in securities (including stocks, bonds, commodities, etc.) during specific hours of any business day, adhering to the market regulator guidelines.
Over the Counter (OTC) markets are decentralised markets where market participants trade stocks, commodities, currencies or other instruments through a dealer. The trade happens directly between the two parties without a central exchange. Generally, securities trade via OTC because they cannot meet the listing requirements of the exchanges.
If a stock is not on a standard stock exchange, it can still be traded Over the Counter (OTC).
A regional stock exchange is located outside the county’s primary financial centre. Companies that cannot meet the strict listing requirements of national exchanges may qualify for a regional stock exchange. Sometimes, a company that qualifies for a national stock exchange may also register for one or more regional exchanges.