1. Electronic Trading: Introduction
  2. Electronic Trading: The Exchanges
  3. Electronic Trading: The Role of a Designated Market Maker
  4. Electronic Trading: The Role of a Market Maker
  5. Electronic Trading: Super Display Book (Formerly SuperDOT)
  6. Electronic Trading: Electronic Communications Networks (ECNs)
  7. Electronic Trading: Small Order Execution System (SOES)
  8. Electronic Trading: Level I, II and III Access
  9. Electronic Trading: Conclusion

There are more than a dozen electronic exchanges fighting for their share of trading in the $26 trillion U.S. stock market, but the New York Stock Exchange (NYSE) and Nasdaq are the most widely known – and widely traded.

NYSE

The NYSE is one of the largest stock exchanges by trading volume. Its roots trace back to 1792 when 24 stockbrokers famously met beneath a buttonwood tree in lower Manhattan to sign the Buttonwood Agreement to trade securities on commission. Nearly 100 years later – in 1886 – NYSE reach a major milestone: one million shares traded in a single day. Today, more than one billion shares trade on a typical day, with much of the trading focused on large and medium-sized companies, including the blue chips. (For related reading, see The History of Stock Exchanges.)

The push toward electronic trading helped prompt NYSE’s 2005 acquisition of rival market the Archipelago Exchange – a fully electronic exchange that listed new and fast-growing companies. Following the purchase, the Archipelago Exchange was renamed NYSE Arca – a name it continues to operate under today. Not long after that deal, the NYSE bought the American Stock Exchange, initially renaming it to NYSE MKT and, most recently, NYSE American. In contrast to the NYSE, NYSE American focuses on trading in small-cap stocks.

Today, all three national stock exchanges – NYSE, NYSE Arca and NYSE American – are owned by the Intercontinental Exchange (ICE), a global markets operator that also owns several other futures and options exchanges. While most trading is done electronically these days, floor traders are still used to set pricing and deal in high-volume institutional trading.

Nasdaq

Nasdaq – short for National Association of Securities Dealers Automated Quotations – emerged on the scene in 1971 to become the NYSE’s first major competitor. Today, it’s the largest U.S. electronic stock market: With about 3,200 companies, it lists more companies and, on average, trades more shares each day than any other U.S. market. While Nasdaq lists many of the tech giants like Microsoft (MSFT), Cisco (CSCO) and Intel (INTC), it’s home to companies from all areas of business, including retail, communications, financial services, transportation, media and biotechnology. 

In the late 2000s, Nasdaq acquired the Boston Stock Exchange and the Philadelphia Stock Exchange – one of the nation’s oldest exchanges, which predated the NYSE by two years. Today, Nasdaq operates 25 markets including one clearing house and five central depositories that offer trading and market services across multiple asset classes.

Other Exchanges

While the NYSE and Nasdaq were the only exchanges in the U.S. for years, today there are more than a dozen, including those that operate under the umbrellas of the Intercontinental Exchange and Nasdaq, plus Bats Global Markets, the National Stock Exchange, the Chicago Stock Exchange and The Investors Exchange (IEX) – the exchange made famous by Michael Lewis’s 2014 book “Flash Boys.” Across all exchanges, the vast majority of trading is now done electronically. Because exchanges continue to consolidate – and new ones form – you can expect the list of exchanges to evolve in the coming years. (For related reading, see NYSE Trading Speed Bump to Counter Flash Boys.)


Electronic Trading: The Role of a Designated Market Maker
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