1.5. What Are Stock Exchanges, NYSE, and Nasdaq?
Lesson objective
Understand where stocks trade and why organized markets exist.
A stock exchange organizes trading between buyers and sellers under common rules. In the United States, NYSE and Nasdaq are two of the best-known markets, although other trading venues also exist.
A broker receives the customer's order and routes it for execution. The investor usually does not connect directly to the exchange. The displayed price changes according to available orders, liquidity, and new information.
Markets may also temporarily halt trading in certain circumstances, such as major announcements or extreme price movements.
How an exchange fits into a trade
Investor → Broker → Exchange/trading venue → Matching orders → Execution
Bid-ask spread = Lowest ask − Highest bid
Simple quote
If the best bid is $49.98 and the best ask is $50.02, the spread is $0.04. A market buyer may execute near the ask and a market seller near the bid, but actual execution can differ.
| Market | What happens | |---|---| | Primary | New securities are issued and capital may flow to the issuer | | Secondary | Existing securities trade among investors |
The exchange organizes trading; it does not decide whether a company is a good investment.
Essential terms
| Term | Practical meaning | |---|---| | Exchange | A regulated marketplace where securities trade. | | Liquidity | The ability to buy or sell without moving the price too much. | | Bid / Ask | The best available buyer price and seller price. |
What you should remember
- The broker is the usual intermediary.
- The last quoted price does not guarantee the price of a future order.
Practice in Finzati
Filter the Screener by exchange and compare the number of companies listed on NYSE and Nasdaq.