Stock Exchanges: Where Stocks Trade
You've decided to buy a stock. But where does that transaction actually happen? Let's peek behind the curtain.
What Is a Stock Exchange?
A stock exchange is a marketplace where buyers and sellers meet to trade stocks. Think of it like a farmers market, but for company ownership.
The Farmers Market
At a farmers market:
- Sellers set up booths with their produce
- Buyers walk around comparing prices
- When buyer and seller agree on a price, a transaction happens
Stock exchanges work similarly, except:
- Everything is electronic (no physical booths)
- Transactions happen in milliseconds
- Millions of trades occur daily
The Major U.S. Exchanges
NYSE (New York Stock Exchange) 🗽
- Founded: 1792
- Location: Wall Street, New York
- Style: Traditional, prestigious
- Notable stocks: Berkshire Hathaway, Walmart, Coca-Cola, JPMorgan
- Fun fact: Still has a trading floor with human traders (mostly ceremonial now)
NASDAQ
- Founded: 1971
- Location: Fully electronic (no physical trading floor)
- Style: Tech-focused, modern
- Notable stocks: Apple, Microsoft, Amazon, Google, Tesla
- Fun fact: First fully electronic stock exchange in the world
Other Exchanges
- NYSE American — Smaller companies
- CBOE — Options trading
- IEX — Designed to be fairer for regular investors
Key Takeaways
- Stock exchanges are marketplaces for buying and selling stocks
- NYSE and NASDAQ are the two biggest U.S. exchanges
- Most trading is now electronic, happening in milliseconds
How a Trade Actually Happens
When you click "Buy" on your phone:
- Your order goes to your broker (Fidelity, Schwab, Robinhood, etc.)
- Broker routes it to an exchange or market maker
- Exchange matches your buy order with a sell order
- Trade executes — usually in under a second
- Settlement happens — stock officially transfers to you (T+1, next business day)
It's Incredibly Fast
Modern exchanges can process millions of orders per second. Your trade executes faster than you can blink. The days of shouting traders on a floor are mostly history.
Does It Matter Which Exchange?
For regular investors: Not really.
- You can buy any stock through any major broker
- Your broker handles the routing automatically
- You'll get similar prices regardless of exchange
The exchange a company lists on is more about prestige and listing requirements than anything that affects you as an investor.
Listing Requirements
To trade on an exchange, companies must meet certain standards:
| Requirement | NYSE | NASDAQ |
|---|---|---|
| Min. Share Price | $4 | $4 |
| Min. Shareholders | 400 | 300 |
| Min. Market Cap | $40M+ | $15M+ |
| Financial Standards | Strict | Moderate |
Companies that don't meet these standards trade on "OTC" (over-the-counter) markets—generally riskier and less regulated.
Exchange Myths
- "NYSE stocks are better than NASDAQ stocks" — Not true, both have great and terrible companies
- "I need to trade on a specific exchange" — Your broker handles this automatically
- "Trading still happens on a physical floor" — 99%+ is electronic now
Next up: Market hours, ticker symbols, and the basic terms you need to know.