Why list on the Nasdaq versus other stock exchanges?

The primary advantages for a company listing on the Nasdaq exchange are lower listing fees and lower minimum requirements to qualify for a listing. The fact that Nasdaq features all-electronic trading is considered an advantage by many traders as well.

The main disadvantage of a Nasdaq listing as compared to a listing on the New York Stock Exchange (NYSE) or the London Stock Exchange (LSE) is a perception of less prestige, less of a blue-chip status for a company, although this perception has faded considerably as major firms such as Apple, Google and Microsoft have become notable Nasdaq exchange-traded successes.

Advantages of Listing on the Nasdaq

The Nasdaq's lower minimum requirements to be listed offer easier entry for new, smaller companies to be listed on a major exchange. As of 2020, to qualify to be listed on the Nasdaq exchange, a business must have earned in excess of $11 million in the past three years and must have at least 1.25 million shares of stock issued, with a total market value of at least $45 million. In contrast, the NYSE listing requirements specify that the company's total outstanding share value must exceed $100 million.

The Nasdaq offers significantly lower listing fees than the NYSE as well. The Nasdaq annual listing fee is $47,000, compared to the NYSE's annual listing fee of $71,000. Over a period of one year, a company listed on the Nasdaq instead of the NYSE could save more than the cost of one year's listing.

The NYSE listing fee for an initial public offering (IPO) is higher than that of the Nasdaq, with the NYSE fee for an IPO listing at $295,000, compared to the Nasdaq IPO fee of $150,000.

The Nasdaq was the first all-electronic trading exchange. This would appear to be an advantage as electronic trading increasingly becomes the norm worldwide on trading exchanges. The NYSE still uses specialists, actual people working on the floor of the exchange that buy and sell large blocks of stock. While the NYSE would likely argue that its use of specialists guiding trades is superior, the faster execution available through straight electronic trading appears to be the deciding factor for investors.

Disadvantages of Listing on the Nasdaq

The NYSE, nearly 200 years older than the Nasdaq exchange, does still carry a level of prestige, a recognition of its place as the U.S. stock exchange. Many companies initially listed on the Nasdaq have since jumped ship to the NYSE, willingly foregoing the significant savings in listing fees for the recognition of being traded on the NYSE. Such firms include Nortel and E-Trade. In contrast, Aeroflex is so far the only major firm known to have transferred from the NYSE to the Nasdaq.

With the increase in the globalization of financial markets, both the Nasdaq and the NYSE have sought to establish partnerships with other major exchanges, the Nasdaq with the LSE and the OMX, and the NYSE with Euronext and the Tokyo Stock Exchange. This trend is likely to continue, as the passage of Sarbanes-Oxley and other regulatory changes have translated into making it increasingly difficult for U.S. stock exchanges to compete with foreign exchanges for new company listings. This trend is likely to lead to more global consolidation of exchanges.

Article Sources

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  1. Nasdaq. "Nasdaq: Initial Listing Guide March 2021," Page 6 and 7. Accessed March 22, 2021.

  2. NYSE. "Overview of NYSE Quantitative Initial Listing Standards," Page 2. Accessed March 22, 2021.

  3. New York Stock Exchange. "NYSE Listed Company Manual: Section 902. 03 Fees for Listed Equity Securities." Accessed March 22, 2021.

  4. Nasdaq. "Nasdaq: Initial Listing Guide March 2021," Page 12 and 13. Accessed March 22, 2021.

  5. New York Stock Exchange. "NYSE Listed Company Manual: Section 902. 03 Fees for Listed Equity Securities." Accessed March 22, 2021.

  6. Nasdaq. "Nasdaq: Initial Listing Guide March 2021," Page 12. Accessed March 22, 2021.

  7. Associated Press. "Aeroflex Leaving NYSE for Nasdaq." Accessed March 22, 2021.

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