How Do Stock Exchanges Work?

Stock exchanges are particular networks within the broader stock market where stockbrokers meet. Exchanges provide companies with the opportunity to grow and flourish in the United States and around the world.

Nasdaq, the first electronic stock exchange, was founded in 1971. With a focus on technology and innovation, the Nasdaq grew to become the most active exchange in the U.S., home to many of the companies—think Google, Amazon. Netflix and Facebook—that have literally changed the way we live. On any given day, more than 2 billion shares are traded on the Nasdaq, from more than 4,000 listings with a market value of approximately $12 trillion.

Downtown from Nasdaq's Times Square headquarters sits the New York Stock Exchange, which was founded in 1792. Unlike Nasdaq, the NYSE is only partially electronic: some business is still conducted every day by human traders on the floor.

Both Nasdaq and the NYSE are themselves publicly traded companies—on their own exchanges.

Every stock exchange writes its own rules for corporations that want to trade their stock there. These rules can include how long the company has existed, how many shares are held publicly and how much net income the company reports. Because the Nasdaq is open to listing smaller, newer companies than the NYSE, most U.S. IPOs are launched there. At the same time, each exchange must follow rules set by a larger governing body—in the United States, that would be the Securities and Exchange Commission (SEC).

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