Question

The forms and methods of stock market operation

1. A competent U.S. financial manager must understand the way U.S. stock markets are structured and operate. In the United States, the stock markets consist of primary markets, secondary markets, listed security exchanges, over-the-counter markets, as well as the regulations that monitor these markets.

Which major domestic stock market has the most restrictive listing requirements in terms of the market value of the listed firm?

A. The New York Stock Exchange (NYSE)

B. The National Association of Security Dealers Automated Quotation System (NASDAQ)

C. A regional exchange, such as the Chicago Stock Exchange

2. (Trading floor brokers, Supplemental liquidity providers - SLPs, OR Designated market makers - DDMs) act as agents for investors who want to buy or sell stocks.

3. True or False: One of the major differences between the New York Stock Exchange (NYSE) and the over-the-counter (OTC) markets is that the OTC operates an auction on a centralized physical exchange, while the NYSE completes all of its transactions in a decentralized electronic marketplace.

False

True

Answer 1

1. (A) The New York Stock Exchange (NYSE). NASDAQ has lower listing fees as compared to NYSE. Also listing in NYSE is difficult as they usually list all big value blue chip companies with good reputation. on the other hand NASDAQ attracts all tech companies. Listing can be easily done on regional exchanges if the entry to NYSE or NASDAQ is restricted for these companies
2. Trading Floor Brokers- They act as agents for investors to buy or sell stocks. DMM are responsible for maintaining a fair and orderly market in that or a set of securities. Supplemental Liquidity Providers on the other hand are participants who are responsible for creating high volumes to add liquidity to the market.
3. False- An OTC market is a decentralized market without a central physical location like the New York Stock exchange.