Stock Markets

New York Stock Exchange (NYSE) - New York Stock Exchange. The oldest and largest stock exchange in the U.S., located on Wall Street in New York City. The NYSE is responsible for setting policy, supervising member activities, listing securities, overseeing the transfer of member seats, and evaluating applicants. Unlike some of the newer exchanges, the NYSE still uses a large trading floor in order to conduct its transactions. Of the exchanges, the NYSE has the most stringent set of requirements in place for the companies whose stocks it lists, and even meeting these requirements is not a guarantee that the NYSE will list the company (AKA the Big Board).

National Association of Securities Dealers Automated Quotation System (NASDAQ) - A computerized system established by the NASD to facilitate trading by providing broker/dealers with current bid and ask price quotes on over-the-counter stocks and some listed stocks. Unlike the Amex and the NYSE, the Nasdaq does not have a physical trading floor that brings together buyers and sellers. Instead, all trading on the Nasdaq exchange is done over a network of computers and telephones. Also, the Nasdaq does not employ market specialists to buy unfilled orders like the NYSE does. Orders for stock are sent out electronically on the Nasdaq, where market makers list their buy and sell prices. Once a price is agreed upon, the transaction is executed electronically.

Nasdaq Small Caps - Market for securities of smaller, less-capitalized companies (small caps) that do not qualify for inclusion in the Nasdaq National Market. See www.nasdaq.com for the list of Nasdaq qualifications.

American Stock Exchange (AMEX) - The second-largest stock exchange in the U.S., after the New York Stock Exchange (NYSE). In general, the listing rules are a little more lenient than those of the NYSE, and thus the AMEX has a larger representation of stocks and bonds issued by smaller companies than the NYSE. The AMEX started as an alternative to the NYSE. It originated when brokers began meeting on the curb outside the NYSE in order to trade stocks that failed to meet the Big Board’s stringent listing requirements, but the AMEX now has its own trading floor. In 1998 the parent company of the NASDAQ purchased the AMEX and combined their markets, although the two continue to operate separately (AKA the Curb).

Over The Counter (OTC): Penny Players

OTC refers to markets other than the organized exchanges described above. OTC markets generally list small companies, and often (but not always) these companies have "fallen off" to the OTC market because they were de-listed from Nasdaq.

Some individual investors will not even consider buying OTC Penny Stocks due to the extra risks involved. On the other hand, some strong companies trade on the OTC. In fact, several strong companies have deliberately switched to OTC markets to avoid the administrative burden and costly fees that accompany regulatory oversight laws such as the Sarbanes-Oxley Act. On balance, you should be careful when investing in the OTC if you do not have experience.

There are two OTC markets. Market Makers control these markets, a topic to be discussed later.

Over the Counter Bulletin Board (OTCBB) - A regulated electronic trading service offered by the National Association of Security Dealers (NASD) that shows real-time quotes, last-sale prices, and volume information for over-the-counter (OTC) equity securities. An OTC security generally is not listed or traded on any other national securities exchange including the NASDAQ. OTC securities include national, regional and foreign equity issues, warrants, units, American Depositary Receipts (ADRs) and Direct Participation Programs (DPPs). These companies, however reliable, do file annual and quarterly financial reports.

Over the Counter Pink Sheets (PK) - daily publication compiled by the National Quotation Bureau with bid and ask prices of over-the-counter stocks, including the market makers who trade them. Unlike companies on a stock exchange, companies quoted on the pink sheets system do not need to meet minimum requirements or file with the SEC. Pink sheets also refers to OTC trading.

The pink sheets got their name because they were actually printed on pink paper. You can tell if a company trades on the pink sheets because the stock symbol will end in 'PK'.

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