Most of the public assumes that a stock exchange is just a marketplace where people buy or sell stocks. That is a correct assumption. But that is not all that a stock exchange is.
Defining a Stock Exchange in a more specific sense, they are actually corporations or an organization which provide services to the buyers and sellers of stocks, bonds, derivatives and other financial products.
What it means is that a stock exchange is a company with its own employees, but of course the government has a big interest on it; stock exchanges have been used a lot of times as one of the many indicators of a country`s economic power. This means that while the government can legislate rules and regulations, the company operates day to day under its own administration, just with the guidance of the said government.
Knowing the 2 best Stock Exchanges in the world and how they do their functions will definitely help people understand how important a stock exchange is and have some basic knowledge on what a functioning stock exchange do.
The New York Stock Exchange
The biggest Stock Exchange in the world, the NYSE is immensely valuable. Estimates (NYSE`s own estimates) say that a third of all equities traded in the world is traded in the NYSE. The market cap of the NYSE is at $19 trillion. That is immensely large since the total value of next three largest stock exchanges amounts only to $16 trillion.
The NYSE functions like a marketplace, literally. You can hear people talking to their phones, some in a calm voice while others in an excited or panicked tone. In fact, you can see people waving their hands. If you enter at opening or closing hours, you can hear the bell signaling the start or end of the trading day.
On the other hand, the second largest stock exchange is NASDAQ. While both are located in the United States, there is a big difference on how they execute their functions. The NYSE still has that traditional trader feel with human voices, ringing phones and waving hands.
On the other hand, NASDAQ is located inside a communications tower. You can find more engineers and IT infrastructure people here rather than traders. This is because the trading takes place directly with buyers and sellers through market makers.
One large factor why there is a big difference in function and operations is due to perceptions; NASDAQ is more geared towards the more modern, high tech companies while the NYSE is more geared towards blue chips and companies with a long track record.