Picking a stock is not as easy as differentiating NYSE from the Nasdaq. And more importantly, such differences are independent of the quality of the stocks. Both bourses make up the big majority of the US stock market. Easily, these stock exchanges maintain the country’s premiered blue chip stocks; wherein Microsoft is Nasdaq’s “flagship” stock and General Electric is arguably NYSE’s most well established listed company. The most glaring difference between the two is their own choice of medium to do transactions. “Nasdaq-listed trades are entirely automated.
NYSE trades are still overseen by specialists. While traders have some say in how, when and at what price the trades are crossed, they can’t pick the market” (NYSE vs. Nasdaq, (2003), from web site http://www. forbes. com/2003/08/18/cx_aw_0818mondaymatchup. html). Meanwhile, NYSE’s seven (7) specialists act as facilitators with the interest of making a very liquid market in the stock exchange. Nasdaq’s market makers on the other hand, actually act as participants in the buying and selling of shares (electronically, of course).
NYSE is a well-know auction’s market wherein “the highest bidding price will be matched by the lowest asking price” (The Tale of Two Exchanges: NYSE and Nasdaq, from web site http://www. investopedia. com/articles/basics/03/103103. asp). Conversely, Nasdaq is more “organic” as a dealer’s market where market makers buy and sell from each other against their personal inventories. Lastly, history makes a big contribution to each bourse’s public perception.
Whereas the NYSE is viewed as a more established institution (founded in 1792), Nasdaq is perceived as high-growth and highly volatile trading platform and subsequently attracts mostly firms from the IT and Telecom industries. Some first-time participants who are cost-driven prefer Nasdaq’s cheaper listing fee as well. The case of former Worldcom CEO Bernard Ebbers created a ripple effect in the telecommunications industry and severely put its existing form, MCI, into a whirlpool of debt amounting to around $35 billion. Even when Verizon purchased MCI for $7.
6 billion when the latter filed for bankruptcy, the new executive officers had the daunting tasks of regaining public trust while at the same unfolding more antitrust issues and financial window dressing perpetrated by the previous incumbents. Thousands of jobs were lost; creditors and investors alike could not recoup most of their stakes in the company. “…the fall of WorldCom altered the fortunes of a number of telecommunications industry participants, none more so than AT&T Corporation” (Romar, Edward J. , Worldcom Case Study Update 2006, (2006), from web site http://www. scu.
edu/ethics/dialogue/candc/cases/worldcom-update. html). The demise of Worldcom after the scandal affected the entire industry, especially the other forerunners that put too much reliance on the now bankrupt company as the beacon of industry standards. Bloated projections not only destroyed Worldcom, but it also damaged financially the competitors who reacted aggressively to counter these projections. For example, Worldcom’s former suppliers Nortell and Lucent Technologies took a nosedive via layoffs and below book value share prices because of these overstated figures that were never accomplished anyway.