US STOCK EXCHANGES 4 Assignment 1 Kamran Isayev Kenneth Mett

US STOCK EXCHANGES 4 Assignment 1 Kamran Isayev Kenneth Metts 10.16.2017 The New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automated Quotation System (NASDAQ) are the two largest stock exchanges in the United States. They are located in New York and Chicago, respectively. NASDAQ is the larger of the two in terms of daily traded volume, listing approximately 3,200 securities, and both lead the global market in equity trading. The primary distinctions between the two lie in their operational modes, types of equities traded, and market operation methods. NASDAQ operates as a dealer-based securities market where dealers sell stocks directly to buyers via internet or telephone transactions. Trading on NASDAQ takes place electronically, providing a fully digital marketplace. Retirement from physical trading floors highlights its technological and innovative approach, making it suitable for trading emerging and volatile stocks, particularly those of technological companies. To be listed, companies need to meet less stringent requirements compared to the NYSE, such as having at least 2,200 shareholders, trading at least 100,000 shares monthly, and maintaining a market capitalization of $100 million with $75 million in annual revenues. The NYSE functions as an auction-style market where brokers act on behalf of clients to facilitate trades. These trades are executed physically on the trading floor, emphasizing a traditional, human-driven auction process. The NYSE demands more rigorous listing criteria, including minimum shareholder counts, trading volumes, and market capitalization, which tend to be met by more established firms. Trading on the NYSE demands significant entry costs, including an initial listing fee ranging from $50,000 to $70,000 and an annual fee of approximately $500,000. The market is characterized by high standards for stability and corporate maturity, with companies like 21st Century Fox and Abercrombie & Fitch listed on its platform. Financial analysis of sample companies from both exchanges reveals insights into their cash flow and profitability. For instance, 21st Century Fox's free cash flow in 2013 was USD 2.38 billion, and Abercrombie & Fitch's was USD 48.75 million. Free cash flow represents the company's ability to generate liquid assets after expenses, indicating strong operational efficiency and financial stability. Profitability ratios further illuminate their financial health. 21st Century Fox exhibits high net profit margins (approximately 25%) and return on equity (around 34%), signaling effective management and lucrative operations. Conversely, Abercrombie & Fitch's profitability ratios reveal areas for improvement,