Organized and nonprescription securities exchanges are similar in that they both trade with the trading of securities such as stocks and bonds. However. they are different in many ways. An organized securities exchange is defined as “A securities market place where buyers and Sellerss on a regular basis gather to merchandise securities harmonizing to the formal regulations adopted by the exchange. ” ( www. trading-glossary. com ) On the other manus. a security is traded nonprescription ( OTC ) if it trades in some context other than a organized exchange. The New York Stock Exchange and the Nasdaq stock market are two illustrations of organized securities exchanges.
In an organized market. trading is done in assorted ways: it may happen on a uninterrupted auction footing. it may affect agents purchasing from and selling to traders in certain types of stock. or it may be conducted through specializers in a peculiar stock. Some stock exchanges. such as the New York Stock exchange ( NYSE ) . sell seats ( the right to merchandise ) to a limited figure of members who must run into eligibility demands. Stockss must likewise meet and maintain certain demands or hazard being delisted. Stock exchanges differ from state to state in eligibility demands and in the grade to which the authorities participates in their direction. The London Stock Exchange for illustration. is an independent establishment. free from authorities ordinance.
In Europe. members of the exchanges are frequently appointed by authorities functionaries and have semi governmental position. In the U. S. . stock exchanges are non straight run by the authorities but are regulated by jurisprudence. Technological developments have greatly influenced the nature of trading. In a traditional full-service securities firm. a client placed an order with a agent or member of a stock exchange. who in bend passed it on to a specializer on the floor of the exchange. who so finished the dealing. Increased entree to the Internet and the addition of electronic communications webs ( ECNs ) changed the investing universe. Through e-trading. the client enters an order straight online. and package automatically matches orders to accomplish the best monetary value available without the engagement of specializers or market shapers.
The New York Stock exchange is the largest organized securities exchange in the universe. The NYSE encourages extended public engagement in this economic procedure by functioning the involvements of the companies. which have listed their securities on the Exchange. More than 3. 000 of them naming more than 253 billion portions of stock valued at over $ 11 trillion. All trading is conducted in full position of the populace. and all investors can take part during the trading twenty-four hours and cognize precisely what is taking topographic point. Membership is obtained by buying a place from an bing member ; rank is limited to 1. 366 seats. To be listed on the NYSE. a company must gain $ 2. 5 million before revenue enhancements. have more than one million portions of stock outstanding. give common shareholders voting rights. and publish periodic fiscal statements.
NASDAQ is the world’s largest electronic stock market. Nasdaq began as a citation system. but has now grown to go an organized securities market. It is non limited to one cardinal trading location. Rather. trading is conducted through NASDAQ’s computing machine and telecommunications web. which transmits real-time quotation mark and trade informations to more than 1. 3 million users in 83 states. Without size restrictions or geographical boundaries. NASDAQ’s “open architecture” market construction allows an about limitless figure of participants to merchandise in a company’s stock. NASDAQ lists the securities of about 4. 100 of the world’s taking companies. Trading on NASDAQ is non limited to any fixed figure of participants. This allows a big figure of houses with widely different concern theoretical accounts and trading engineerings to link to the NASDAQ web and compete on an equal footing. Rather than coercing investors to travel through a individual fiscal house to purchase or sell stocks. NASDAQ links up a assortment of rivals and lets participants take with whom they are traveling to merchandise. All houses merchandising NASDAQ stocks must be certified with the Securities and Exchange Commission ( SEC ) and registered with NASDAQ and NASD Regulation.
The over the counter market is defined as “A big aggregation of agents and traders. connected electronically by telephones and computing machines. that provides for trading in unlisted securities” ( Brigham & A ; Houston p. 128 ) . In an auction market. exchange members match purchase and sell orders as they come in more or less at the same time. However. when a stock is seldom traded. few bargain and sell orders come in. so it is non easy to fit them in a sensible sum of clip. Because of this. securities firm houses keep stock lists of such stocks. and so seek to do a market for them.
The stocks are bought when single investors want to sell. and are sold when investors want to purchase. Schedules of fees for purchasing and selling securities are non fixed in the nonprescription market. and traders derive their net incomes from the markup of their merchandising monetary value over the monetary value they paid. Many bond issues and preferred-stock issues. including U. S. authorities bonds. are listed on the New York Stock Exchange but have their chief market nonprescription. Other U. S. authorities securities. every bit good as province and municipal bonds. are traded nonprescription entirely. Institutional investors such as common financess frequently trade nonprescription because they are given volume price reductions non offered on the exchanges. The ordinance of the nonprescription market is carried out mostly by the National Association of Securities Dealers. which establishes regulations of behavior and protects members and investors from maltreatments.
In decision. organized and nonprescription securities exchanges have their similarities and their differences. The organized securities exchange trades with more often traded securities. as opposed to the over-the counter exchange. which deals with the less frequently traded securities. In organized exchanges the demands for naming stocks on the exchanges are rigorous. as opposed to the nonprescription market. The New York Stock Exchange and NASDAQ were discussed. and are two illustrations of organized securities exchanges.