Introduction
The NYSE and the NASDAQ are two US stock exchanges with the joint market capitalization estimated at roughly $32 billion. Both stock exchanges play a significant role on the global equity market and take up a sizable portion of it. The NYSE and the NASDAQ have become recognizable household names and do show some differences and similarities in their functioning. The NYSE has a longer history than the NASDAQ: the former dates back to 1792 while the latter turns 49 in 2020 (Desjardins, 2017).
Comparison
They differ in market types: NYSE is an auction market where participants buy from each other, matching the highest bidding price with the lowest asking price. On the other hand, the NASDAQ is a dealer’s markets where all transactions require a medium. As of now, the NASDAQ’s system connects buyers and sellers electronically. The NYSE has only one DMM (designated market maker) who ensures the fairness and order on the market by buying and selling as many shares as needed. By contrast, the NASDAQ has not one but fourteen DMMs for each stock (Desjardins, 2017). Lastly, one more difference between the stocks is their perception: the NYSE companies are considered less volatile than those of the NASDAQ.
Table 1. The free cash flow from 2015 and 2016 at the NYSE and the NASDAQ (“Annual reports,” 2018; “NYSE reports,” 2018)
Free cash flow is defined as the net amount of cash and cash-equivalents that is being transferred into and out of a business. Basically, a company’s attractiveness and valuability for shareholders is evaluated by its ability to generate positive cash flows (Bollerslev, Xu, & Zhou, 2015). At that, it is preferred that the company maximizes long-term free cash flow. As seen from Table 1, both the NYSE and the NASDAQ had succeeded in generating positive free cash flow from 2015 through 2016. The NYSE seems to generate more cash flow, which is probably the only noticeable difference between the dynamics within the two stocks. Apart from that, it is evident that the free cash flow at both the NYSE and the NASDAQ are subject to seasonal fluctuations. Both stock markets start and finish the year strongly but generate less cash between March and December.
Table 2. Ratios at the NYSE and the NASDAQ (“Annual reports,” 2018; “NYSE reports,” 2018)
As seen from Table 2, both stocks are doing well in terms of covering short-term borrowings and obligations with cash and liquid assets. The NYSE and the NASDAQ have the liquidity ratios around one; the metrics had been stable from 2017 through 2018. Asset management ratios are low for both stock markets, demonstrating their ability to use their assets to generate revenue. Lastly, judged by the profitability ratios, the NYSE and NASDAQ were highly profitable in 2017-2018.
References
Annual reports. (2018). Web.
Bollerslev, T., Xu, L., & Zhou, H. (2015). Stock return and cash flow predictability: The role of volatility risk. Journal of Econometrics, 187(2), 458-471.
Desjardins, J. (2017). Here’s the difference between the NASDAQ and NYSE. Web.
NYSE reports. (2018). Web.