Financial Management of NYSE and NASDAQ Stock Exchanges

Overview of NYSE and NASDAQ

The New York Stock Exchange (NYSE) is based along Wall Street, New York City. The stock exchange is owned by NYSE Euronext, a company formed after the merger between NYSE Group and Euronext N.V (NYSE Euronext, 2012).

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NASDAQ Stock exchange is also based in New York. It is owned by NASDAQ OMX Group. It is the world’s largest stock exchange based on the value of shares traded (NASDAQ OMX, 2012).

Similarities between NYSE and NASDAQ

The two stock exchanges have several aspects in common. They are both based in New York City. They are also represented on the Standard and Poor (S&P) 500 index and owned by global stock exchange holding companies which are also known as cross-border exchange groups. Both stock exchanges trade derivatives (NYSE Euronext, 2012).

Differences between NYSE and NASDAQ

The two stock exchanges differ in terms of the trading method used and the type of companies listed. NYSE uses a combination of electronic and physical trading methods. Physical trading, through brokers or floor traders (Brooks, 2009), is a more common feature of this stock exchange. NYSE has an automated system that is used by floor traders. This system allows them to make use of modern technology in order to increase trading efficiency. NYSE also has an over-the-counter trading platform known as ArcaEdge (NYSE Euronext, 2012). NASDAQ, on the other hand, is fully electronic. All trading is done through an automated over-the-counter system. Traders are able to make transactions from their trading accounts which are accessible from NASDAQ’s website (NASDAQ OMX, 2012).

The other difference is the type of companies listed. NYSE has more than 8500 listed companies (NYSE Euronext, 2012), most of which are in the manufacturing sector. This stock exchange also has a special market for Small and Medium-sized Enterprises (SMEs) known as NYSE MKT which has over 550 listed companies. NASDAQ has 2754 listed companies and 112 other companies awaiting listing. Most of the companies listed in NASDAQ are technology companies. 77% of all listed technology companies in the U.S are listed on NASDAQ (NASDAQ OMX, 2012).

The Public Company Accounting Reform and Investor Protection Act of 2002

The Public Company Accounting Reform and Investor Protection Act of 2002, also known as The Sarbanes Oxley Act of 2002, is a U.S Congress Legislation that was enacted in order to protect investors and restore investor confidence after the bankruptcy of large companies such as Enron, WorldCom, and Triton due to financial fraud (Rimmel, 2008).

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The Sarbanes Oxley Act (2002) contains laws governing the internal and external financial affairs of public companies operating within the U.S. It establishes a regulatory body, the Public Company Accounting Oversight Board, whose mandate is to register accounting firms that audit public companies, to set auditing, quality control, and independence standards, and to investigate and undertake disciplinary action on companies and firms that do not adhere to the set rules and regulations.

The act stipulates the rights and responsibilities of corporate stakeholders such as managers, boards of directors, and audit committees. It gives guidelines on minimum accounting disclosures that must be included in the financial statements. The act also outlines internal control procedures in section 404.

The Sarbanes Oxley Act (2002) also stipulates the independence requirements of audit firms. It gives guidelines on methods that audit firms must use to meet independence requirements such as audit partner rotation, approval requirements, and avoidance of conflicts of interest.

The Act also derives from several studies done on corporate governance for evidence of best practices and practices to be avoided. The Act also stipulates situations where fraud and white-collar crimes may occur and outline the penalties for such acts.


Brooks, R. (2009). Financial Management: Core Concepts. Upper Saddle River, New Jersey: Prentice-Hall.

NASDAQ OMX. (2012). About Us. Web.

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NASDAQ OMX. (2012). US Market. Web.

NYSE Euronext (2012). Company Overview. Web.

NYSE Euronext. (2012). The New York Stock Exchange. Web.

Rimmel, G. (2008). The Sarbanes Oxley act: What consequences have American companies identified after implementation of Section 404 of the Sarbanes Oxley Act? Web. The Sarbanes Oxley Act of 2002, Pub. L. No. 107–204, 116 Stat. 745

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