The second stock exchange in New York, and the second largest traditional market, is the AMEX. Elsewhere in the country, there are five more traditional exchanges: the Pacific Stock Exchange (with trading floors in Los Angeles and San Francisco), the Midwest Stock Exchange in Chicago, the Boston Stock Exchange, the Philadelphia Stock Exchange and the Cincinnati Stock Exchange. Each of these smaller exchanges has some exclusive stocks, usually small or locally-owned companies, but they also trade stocks that are listed on the NYSE or the AMEX (“dual-listed” stocks). No stocks trade on both the NYSE and the AMEX.
The smaller regional exchanges offer some distinct features. For example, as it is three hours behind New York, the Pacific market offers continued trading in dual-listed NYSE shares after the NYSE has closed. The Midwest market makes no extra charge for odd-lot transactions (i.e. deals of less than a round lot of 100 shares, and odd-lot orders on the NYSE for dual-listed stocks are often tansferred there. The Philadelphia market carries a number of options, including an option on the GBP/USD exchange rate.
Like the London market, that of Cincinnati has no trading floor, with all transactions conducted by cmputer and telephone.
The most prominent electronic exchange is the NASDAQ. Run by the National Association of Securities Dealers, this automated quotations system is the world’s second largest stock market in terms of the dollar value of trading (after the NYSE). It was established in 1971 to provide a high-tech method of setting stock prices and trading securities “over the counter”. Through a network of computer screens, more than 500 marketmakers post the prices at which they are prepared to buy and sell stocks. The best bid and offer prices are displayed on dealers’ screens and deals are made over the telephone.
This dealer-driven mechanism of making prices is similar to that adopted by the London Stock Exchange after its deregulation in 1986. It differs from the order-driven process used by the NYSE where supply and demand for shares meet through a single “marketmaker”. The system also has less onerous listing requirements than the NYSE, enabling young or small companies in fast-growing industries such as computers, the Internet and biotechnology, to obtain a quotation and access to the capital markets.