Differences Between NASDAQ & Other Stock Exchanges

Historical Evolution of the Major Stock Markets

Stock markets or stock exchanges are self-inclusive. They cater to those individuals most interested and most able to buy and sell stocks. Like many institutions in America, stock markets were born out of a need to compete more effectively and concentrate wealth more easily. In 1792 twenty four New York stockbrokers and businessmen formed the beginnings of the New York Stock Exchange with the Buttonwood Agreement. In this, these individuals agreed to "give preference to each other" in order to avoid a monopoly on sales by securities auctioneers and thus prevent paying a commission on sales of stocks. This also allowed these individuals to avoid new players buying into their private stock domain through the advent of public auctions. In essence, the NYSE started out as a stock trading monopoly (Hoover's, 1995, 806). Traders who were left out of the Buttonwood Agreement formed the American Stock Exchange (AMEX) in 1921 (Hoover's, 1995, 806). In 1939, the National Association of Securities Dealers (NASD) formed the beginnings of NASD Automated Quotations (NASDAQ) market (Hoover's, 1995, 792).

Essentially, trading at the NYSE or AMEX is done within the context of an auction market that allows investors to trade directly with each other, without intermediation by dealers. Dealers and specialists are relegated to a secondary role (NYSE, Rule 92). Those that list on th