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Chapter 13. The Public Offering Process > Stock Markets in the United States

Stock Markets in the United States

One of the first decisions which a company has to make after deciding to embark on an IPO is in which market its shares will be listed for trade. There are two main types of securities markets: a stock exchange or over-the-counter (OTC) trading. The main stock exchange in the United States is the New York Stock Exchange (NYSE). Another large stock exchange is the American Stock Exchange (AMEX), and there are also several smaller regional and specialized stock exchanges. The best-known OTC system is the National Association of Securities Dealers Automated Quotation System (NASDAQ), which includes the NASDAQ National Market (NM) and the NASDAQ Small Cap Market. As the differences between the methods from the standpoint of an issuing firm are small, for the sake of convenience, this chapter will often refer to NASDAQ as a stock exchange, even though it is technically a system allowing trades with market makers.

Stock Exchanges Versus Over-the-Counter Trading Systems

Trade on a stock exchange such as the NYSE is performed by way of an auction, with the trade in each share being concentrated in the hands of a stock exchange member who is nominated by the exchange to be the specialist of the share. In OTC trading, each share could be traded by a large number of market makers who are connected both among themselves and with their customers by electronic media. Securities firms choose for which shares they are market makers.


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