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Whether you are buying or selling a "listed" stock or an "over-the-counter" stock, the end result is pretty much the same: you tell your broker what you want to do, and you end up having bought or sold the stock you intended to buy or sell. But what goes on between giving that order and the resulting trade is a completely different process, depending on the exchange on which your stock is listed and where your broker directs your order
NYSE Trades are Conducted by Auction at One Site Stocks "listed" with the New York Stock Exchange (NYSE) trade primarily at their "post" on the floor of the NYSE, with a small percentage of trades taking place through smaller, regional exchanges. Most listed stock orders given to a broker are routed either via electronic system directly to the specialist's post where that stock is traded or by telephone to the floor broker, who joins the crowd around the post at the NYSE, acting as agent for his customer's order. Buy orders (bids) and sell orders (offers) come together at the post, where the auction takes place. The specialist manages trading and acts as agent for customer orders received electronically at the post. Buy or sell orders to be done "at the market" are paired off almost instantly at the post, while "limit" orders are auctioned by the agents at the post. This system ensures that every order, no matter how small, has equal exposure to the best price. NASDAQ Trades are Conducted by Traders/Market Makers Wherever They Are When a broker receives an order to buy or sell a Nasdaq-listed stock, commonly referred to as "over-the-counter (OTC)", they have the option of directing that order to a market maker or to an electronic order-matching system. Nasdaq (National Association of Securities Dealers Automated Quotations) provides all participating firms the electronic network to display their bidding prices (what they will pay for stock) and their asking (or offering) prices (what they will sell it for). Your broker can direct your order to the firm with the best bid or offer. This is an "open architecture" system. Firms that trade, or "make a market" in, Nasdaq stocks generally keep an inventory in those stocks. They make money by selling stock from their inventory at a higher price than they paid for the stock. ECNs (electronic communication networks) facilitate computerized matching of buy and sell orders and make their money by charging fees to the subscribers of their system. Illustrative Anecdote of the Difference Today the NYSE halted trading while the entire floor observed two minutes of silence to commemorate the lost astronauts of the Columbia space shuttle. Nasdaq could only request that all OTC traders observe this respite in trading.
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