NASDAQ: The New Face in Town

By Samuel Phineas Upham

For the first two centuries of its existence, the New York Stock Exchange faced no real domestic competition. The London Stock Exchange was becoming the standard overseas, but the NYSE was fast becoming its own important economic indicator. In fact, it would become the most important stock exchange in the world by the early 1950s into the 1970s. That was after surviving the Great Depression and the Wall Street bombing of 1920.

Other exchanges from Chicago, Los Angeles and Philadelphia had attempted to usurp the throne the NYSE held onto. None of them stood a chance until NASDAQ.

From inception, NASDAQ was meant to be different from the NYSE. NASDAQ didn’t need to occupy a physical location, because the exchange was computer based. NASDAQ lowered the bid-ask spread, which is the difference between the highest potential cost for a share and the lowest potential sale price. The NYSE used the bid-ask as a tool for profits, but NASDAQ managed to cut those costs and provide traders with a more cost-efficient way of doing business.

The NYSE had to evolve to meet that challenge. Its response was two-fold. First, the company listed itself on its own exchange to fuel demand for its product, and provide some public accountability. It also merged with Euronext and became the first exchange to be considered “trans-Atlantic.”

Although the NASDAQ lists more companies, most people in finance would consider the NYSE to be the prominent exchange. The difference is that the NYSE is now more of a global institution, where it had previously found itself concerned overwhelmingly with American companies.

About the Author: Samuel Phineas Upham is an investor at a family office/ hedgefund, where he focuses on special situation illiquid investing. Before this position, Phin Upham was working at Morgan Stanley in the Media and Telecom group. You may contact Phin on his Samuel Phineas Upham website or LinkedIn.

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