Role of NYSE and NASDAQ in Developing Financial World - Essay Example

Few companies illustrate the situation as well as NASDAQ, the world's first electronic trading company. NASDAQ led the charge away from site-specific bourses and towards a virtual presence where trading is done through software and online. This is the direction many stock exchanges have been going, although most maintain a premier city-specific exchange as part of their brand. With the merger of NYSE and Euronext a few years ago, NASDAQ has a competitor. Both companies do the same thing. NYSE Euronext has a massive sweep now that NYSE has a European foothold. It is more competitive with NASDAQ. Both companies continue to purchase stock exchanges. NASDAQ in 2007, for example, bought the Philadelphia exchange. A lot of the money now is in mergers and acquisitions among stock exchange companies. Both companies are based out of New York.

     There are a few differences between the two companies. NASDAQ has been more aggressive and more of a pioneer. Another big difference is how securities are traded. NASDAQ is a dealer's market: transactions occur through a middleman (Investopedia). With the NYSE, sellers sell directly to buyers through an auction system. People also tend to think of NASDAQ as a high-tech market with more tech securities, although this may not be the case in reality. Nevertheless, although these differences are important, both companies appear to be increasingly converging.

     Both exchanges have had to respond to The Public Company Accounting and Investor Protection Act of 2002, more commonly called the Sarbanes–Oxley Act. This act came into effect after the recession of 2001 and many of the corporate scandals that were unfolding at this time, among them the Enron scandal (Bumiller). Corporate governance was at a low point and directors and officers were stealing money from shareholders. The main purpose was to create a law that would require higher standards in corporate, legal, and accounting sectors to ensure that shareholders did not continue to bear the brunt of misfeasance.

     The financial world has changed dramatically in recent years, and the landscape continues to evolve. Stock exchanges are growing in market capitalization and are more accessible to ordinary people than ever before. The world is becoming a smaller place, as exchanges become globalized. The legal regime is slow to catch up but recent legislation has made an effort in this regard. Who knows what the future will bring?