What is an Exchange?

  • In The Stock Market Game, students buy and sell stocks and mutual funds listed on the three major US stock exchanges: the New York Stock Exchange (NYSE), the American Stock Exchange (AMEX), and the NASDAQ Stock Market. Each exchange has its own specific requirements or “listing standards” that companies must meet in order to be listed on the exchange. Once listed, companies must abide by the rules of its exchange. For more information on the specific exchanges, please look on the exchange websites.

    The NYSE uses an auction platform; buying and selling takes place on the trading floor. In December 2005, the NYSE and Archipelago, an electronic market platform business, agreed to merge, forming the NYSE Group, Inc. On March 8, 2006, NYSE Group, Inc. became a publicly traded company, creating a broader trading platform that provides greater speed for electronic trading in a global market. In addition to the electronic platform, the NYSE Group continues to operate its trading floor.

    The AMEX also uses an auction platform. Shares are traded through the same process used by the NYSE. In 1998, the AMEX merged with the National Association of Securities Dealers (NASD), which also operates the NASDAQ Stock Market, to form "The NASDAQ-Amex Market Group." In 2004 AMEX regained control from the NASD. In 2006, AMEX announced that it would begin taking steps to go public.

    The NASDAQ Stock Market is the largest electronic stock market in the US. The NASDAQ is an automated auction center. Transactions take place on a virtual platform. Investors are at remote locations buying and selling shares on a virtual platform.


    Auction market: Auction market trading, sometimes known as open outcry, is the way the major stock and commodity exchanges, such as the New York Stock Exchange (NYSE) and the Chicago Board of Trade (CBOT), have traditionally handled buying and selling. Brokers acting for buyers compete against each other on the exchange floor, as brokers for sellers do, to get the best price. Trading is intense but orderly because the participants adhere to exchange rules.

    Electronic Communications Network (ECN): An ECN is an alternative securities trading system that collects, displays, and executes orders electronically. Trading on an ECN allows investors to buy and sell anonymously. ECNs also facilitate extended, or after-hours, trading. ECN trade execution can be faster and less expensive than trades handled through screen-based or traditional markets, though the volume is sometimes thin. However some ECNs have been approved for official stock exchange status, expanding the number of stocks that can be traded on their systems.

    Listing Requirement: Each organized securities exchange and stock market — including the New York Stock Exchange (NYSE), the American Stock Exchange (AMEX), and the NASDAQ National Market (NASDAQ) — sets listing requirements a corporation must meet in order to have
    its stocks or bonds traded on that exchange or market. Among the listing criteria are a minimum corporation pretax earnings, a minimum market value and a minimum number of existing shares. For example, the NYSE, which has the most stringent requirements, requires pretax earnings of $2.5 million, a minimum market value of $100 million and at least 1.1 million shares.

    Public Float: The portion of a company's outstanding shares that is in the hands of public investors, as opposed to company officials.

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