The NYSE (New York Stock Exchange) is the largest and most prestigious exchange in the US. As of writing this article, over 3250 companies are currently listed in this exchange
The NYSE provides investors with a number of protective regulations. Two significant ones being:
1. Companies must get shareholder approval for any equity incentive plan (for example, stock option plan or restricted stock plan). In the past, companies were allowed to sidestep shareholder approval if an equity incentive plan met certain criteria; this, however, prevented shareholders from knowing how many stock options were available for future grant.
2.A majority of the members of the board of directors must be independent. However, each company has some discretion over the definition of “independent”, which has caused controversy. Furthermore, the compensation committee must be entirely composed of independent directors, and the audit committee must include at least one person who possesses “accounting or financial expertise”.
Amex (or NYSEAMEX)
The American Stock Exchange (the “Amex”) started as an alternative to the NYSE. It originated when brokers began meeting outside the NYSE in order to trade stocks that failed to meet the Big Board’s stringent listing requirements .
Nowadays, the Amex has its own trading floor, just like the NYSE, and operates very similarly, except that it lists mostly small and mid cap stocks that don’t meet the NYSE’s qualifications. In particular, it specializes in energy companies, start-ups, and biotech firms, as well as in options and other derivatives.In November of 1998 the parent company of the Nasdaq acquired the Amex and combined their markets. However, both exchanged still continue to operate separately, and Amex currently lists around 500 companies.
Unlike the NYSE and the Amex, the Nasdaq (National Association of Securities Dealers Automated Quotation system) does not have a physical trading floor that brings together buyers and sellers. Instead, all Nasdaq trading is done over a computer network and via telephone. The Nasdaq started when brokers started informally trading via telephone; the network was later created and linked by computers during the early 1970s. Over the decades, it has become a serious rival to the NYSE, now listing over 2700 companies, as many big-name technology companies such as Microsoft, Facebook, and even Google chose list on the Nasdaq rather than the NYSE.
Many companies that cannot meet the requirements of the 3 main stock exchanges, may opt to trade over the counter (OTC). Also, when a company listed on one of the 3 exchanges ceases for some reason to comply with the regulations (most often reason is the minimum $1 price per share rule), it may decide to simply move to one of the OTC boards.
The OTCQB market helps investors easily identify companies that are current in their reporting obligations with the SEC or report to a U.S. banking or insurance regulator. OTCQB securities are quoted on OTC Markets Group’s quotation and trading system and sometimes are quoted on FINRA’s BB.
The bottom tier of the OTC market, OTC Pink is a speculative trading marketplace that helps broker dealers get the best prices for investors. OTC Pink has no financial standards or reporting requirements, so companies in this tier choose the level of information they provide to investors and may have current, limited or no public disclosure.
This is by far the most dangerous marketplace to trade, as many of the companies trading on this exchange are not even companies, rather dummy corporations created for the sole purpose of selling stocks.
This security is one of approximately 30 OTC securities that are quoted solely on FINRA’s BB quotation system, so market makers must use the telephone to make any trades. Below FINRA BB there are also ‘Grey Sheet/Grey Market’ stocks that receive no quotation or trading services from the OTC Market or any other U.S. Stock Exchange. Trades are made directly through broker dealers, and can be extremely difficult to execute.
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