NYSE, Nasdaq, and London Stock Exchange: what makes them all different?

Understanding some of the most popular stock exchanges can be really helpful for investors. You may have even heard names like NYSE, Nasdaq, and London Stock Exchange before. Previously, we’ve looked at the difference between a stock market and a stock exchange. Let’s take a look at all you need to know […]

Understanding some of the most popular stock exchanges can be really helpful for investors. You may have even heard names like NYSE, Nasdaq, and London Stock Exchange before.

Previously, we’ve looked at the difference between a stock market and a stock exchange. Let’s take a look at all you need to know about these secondary markets and what makes each one unique.

New York Stock Exchange (NYSE)

The NYSE is the big daddy of all stock exchanges.

There are currently over 3,000 stocks listed on the exchange and the number of trades that take place each day is usually well over a billion!

When you think of money, you think of Wall Street. That famous street is home to the NYSE, though the headquarters have been moved occasionally, like during the Great Fire of New York in 1835.

The evolution of the world’s biggest stock exchange went something like this:

  • 1792 – Twenty-four stockbrokers met on Wall Street and signed the Buttonwood Agreement to facilitate more organised trading of securities in the United States.
  • 1817 – The organisation decided to draft a more formal constitution and rename themselves the New York Stock and Exchange Board.
  • 1863 – The name changed to simply become the “New York Stock Exchange”.
  • 1903 – The New York Stock Exchange opened in its current location.

The trading floor of the NYSE has seen plenty of animated activity over the years, with theatre-like performances of auction trading. Gradually, the exchange has adopted technology but also maintains a physical presence to remain the world’s biggest hub of financial activity.

Nasdaq

Nasdaq is also based in America but is a more modern electronic marketplace for trading securities. It’s the second-largest stock exchange in the world and quite different from the NYSE.

There’s no physical space or trading floor. All trading takes place electronically, which makes sense because this exchange is all about technology.

The Nasdaq came to life in 1971. It was launched initially to help provide information to investors electronically. Now it facilitates billions of trades per day and is home to even more listed companies than the NYSE. Although many of these businesses are smaller in size than those listed on the NYSE.

The Nasdaq is a dealer market, whereas the NYSE is an auction market. So the method of sale is slightly different for securities. Also, the total value (market capitalisation) of all the companies listed on the Nasdaq is smaller than that of the NYSE.

London Stock Exchange (LSE)

The UK actually had its own Royal Exchange set up for merchants and financial dealings way back in 1571. However, many local stockbrokers were deemed unfit to trade there, and so deals were taking place in some of London’s local coffee houses.

In 1773, a group of these coffee-drinking stockbrokers got together and formally created the LSE.

The LSE went on to become the biggest stock exchange in the world for a time.
Although the LSE is now smaller and worth less than the NYSE and the Nasdaq, it’s much more internationally diverse.

Rather than focusing heavily on the UK, the LSE is a true international hub of financial activity. There are over 1,000 companies from around a hundred different countries listed on the exchange’s Main Market.

The LSE tends to have a slightly lower trading volume compared to its American counterparts listed above. Still, the LSE often sees upwards of hundreds of millions of trades each day.

How do these exchanges impact investors?

As an individual investor, you probably won’t interact with these stock exchanges directly. Any trades you make through a share dealing account will make the purchases and sales on your behalf.

Brokers generally charge fees for making trades on stock exchanges. That said, some newer brokers like Freetrade don’t actually charge you any commission!

You can also invest in some of the top companies listed on these stock exchanges by selecting index funds that mimic the Nasdaq Composite or the FTSE 100. This can give you a diversified portfolio without having to pick all the stocks yourself.

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