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02 From zero · Traditional markets · United States

The NYSE and the Nasdaq

Two exchanges, one set of hours, and a word that means two different things. By the end of this lesson you can read the sentence above in full — including the part where almost everyone gets lost without noticing.

Fêr UlianovOpening · 20 s · in Portuguese

The sentence
Aurora Foods lists on the NYSE; the Nasdaq Composite closed higher for the session.

Blurred on purpose. Five pieces, and each one hides something.

What an exchange does

The exchange is not the company

An exchange is a place — these days, a system — where whoever wants to buy a share meets whoever wants to sell one. It does not own the listed companies, it does not decide the price, and it gains nothing when the price rises. It arranges the meeting and charges for the service.

A company sells shares once, when it lists. From the next day on, it is the public trading among themselves, and the company does not receive another cent from those trades. That is why a rising share price puts no money in the company's account.

What lives inside an exchange is two queues: those who want to buy and those who want to sell, each with their own price. Until the two meet, there is no trade — and no new price.

Wants to sell
$50.50300
$50.45800
$50.401 200
Wants to buy
$50.35900
$50.30500
$50.251 500

These two queues are the heart of any exchange. Notice that nobody decides the price: it is the record of the last meeting. Example book, with round numbers.
Why two of them

One is nearly two centuries old; the other was born in a computer

The NYSE began in 1792, under a tree on Wall Street, and to this day it has a real room with real people in it. The Nasdaq appeared in 1971 as the world's first electronic stock market — born with no trading floor, and it never had one.

Both trade electronically today. The difference that survives is that the NYSE has people — designated market makers — charged with running the open and the close for each stock, and with holding things together when the market lurches. On the Nasdaq that role belongs entirely to programs.

Nyse

Founded1792
Trading floorYes, on Wall Street
How it tradesElectronic auction with people at the open and the close
Who owns itIntercontinental Exchange, since 2013
The exchange's own sharestrade on the NYSE

Nasdaq

Founded1971
Trading floorNever had one
How it tradesElectronic from day one
Who owns itNasdaq, Inc.
The exchange's own sharestrade on the Nasdaq
For a beginner the difference almost never matters: an NYSE share and a Nasdaq share are bought the same way, in the same hours. What matters is not confusing the exchange with something else — which is what comes next.
This happens for real

Both exchanges are companies, and both have listed shares. The owner of the NYSE trades on the NYSE; Nasdaq, Inc. trades on the Nasdaq. The exchange is at once the venue and one of the things listed on it.

The day

“The market closed” happens at a set time

Both open at 9:30 a.m. and close at 4 p.m., New York time, Monday to Friday, holidays aside. When the paper says the market closed higher, that window is what it means.

There is trading before and after, with far fewer people: the pre-market and the after-hours session. A price that moves there tends to come undone once the real session opens, because there are few people on either side.

Pre-market Regular session After-hours

The extended windows vary from broker to broker; the regular session does not. The time on your clock is worked out by your browser, from your device's time zone.
The trap

Nasdaq is the name of two things

This is the confusion that most gets in the way of a new reader of market news, and it is not the reader's fault: the same word names a place and a number.

Nasdaq

A venue where shares are traded

A company is listed on the Nasdaq, and its shares change hands there. It is an institution, with an owner, employees and admission rules. It was founded in 1971.

Rule of thumb: if the sentence says rose, fell or closed higher, it is the index. If it says listed on or debuts on, it is the exchange.
And the other names

The Dow Jones and the S&P 500 are indices and nothing else — there is no exchange by those names. Both mix companies from both exchanges. The Dow tracks 30 companies and has an oddity: each one's weight comes from its share price, not from the size of the company. That is why it and the S&P 500 often disagree.

The proof

Now read the sentence

It's the same one from the top, unblurred. Tap each highlighted part.

Aurora Foods on the ; the higher for the .
Start here

Five pieces

Each highlighted word hides a different idea. Tap one of them.

Five taps and the sentence is done.

You can already answer these

If this landed, the lesson did what it promised

  • The exchange arranges the meeting between buyer and seller; it is not the company and it does not set the price.
  • A company is paid for its shares only once, at the listing.
  • The regular session runs 9:30 to 4 p.m. New York time — that is what “closed” means.
  • Nasdaq is the exchange and also the index. The Dow and the S&P 500 are only indices.

Fêr UlianovClosing · 22 s · in Portuguese

Educational material. Aurora Foods is an invented company and the order book is an example, with figures kept round. The facts about the exchanges are structural — dates, owners and hours — and do not change with the session. It is not a recommendation to buy or sell.