BA 543 – Mike Carrigg

 Timeline  Similarities and Differences  Trading Mechanisms  Other Trading Methods

NYSE  1792 – Founded  2000 – Rule 390 Eliminated  2005 – Hybrid Market Launch  2006 – Acquired Archipelago  2006 – NYSE made Public  2007 – Euronext Merger  2008 – Amex Acquistion NASDAQ  1971 – Founded  1978 – Amex Merger  1987 – Small Order Execution System (SOES)  2002 – SuperMontage  2005 – Acquired Instanet  2007 – Acquired PHLX

NYSE/NASDAQ  Ownership:  Public, for-profit  Market Type:  Secondary markets  Quote-driven  Continuous market aspects  Hybrid structure  Technical:  Price reporting, regulation, price variation

NYSE  Market  Order-driven market  Auction type  Specialists system  Physical Location  Mechanisms  SuperDOT  Broker-dealer  Commission broker  Floor Brokers  Registered Traders NASDAQ  Market  Dealer-quote driven market  Market-makers  No physical location  Mechanisms  SOES and SuperMontage  NMM  Small Cap Market

 Originally  You/Firm > Broker > Floor Broker > Execution  Specialist (agents & principals) auction system  Open/close with call market, continuous normally  Now  You/Firm > Broker > Floor Broker/SuperDOT > Execution  Specialists, broker-dealers, commission brokers, registered traders

 Role of the Specialist  NYSE-listed stock assigned to a specialist  Match bid/ask prices for execution  Balance for liquidity by holding shares to maintain market equilibrium  Establish a fair price for stocks at day start  Can also execute stop orders

 Originally  You > Broker > Market Maker > Execution  Purely quote-driven, “fragmented”  Now  Market Maker, SOES, and SuperMontage  PHLX – physical floor space  NMM – Outstanding of $1.1 mil at $1/share  Small Cap – those not meeting NMM

 Role of the Market Makers  Assigned to stock by average daily volume  Once order is received, sells from inventory or locates an offsetting order  Ensure a buyer for every sell order and a seller for every buy order  Enhance market liquidity and long-term market growth

 ECN (Electronic Communication Network)  Off-exchange brokers connecting buyers and sellers  Rule 390  ATS (Alternative trading System)  Direct trading without the use of a broker  ITS (Intermarket Trading System)  Allows traders to move to other exchanges for best price  Algorithmic Trading  Splits large orders into smaller ones, NYSE trade size reduction from 2000 to 330

 Resources  Investopedia Staff. "Electronic Trading Tutorial." Investopedia Web. 15 Apr  Investopedia Staff. "The NYSE and NASDAQ: How They Work." Investopedia. Web. 15 Apr  NASDAQ. Web. 16 Apr  NYSE. Web. 16 Apr  Image Sources  NASDAQ.com, NYSE.com, dealbreaker.com, ceoworld.biz

BA 543 – Mike Carrigg