Stock Exchange v. Stock Index

• Though it might not seem obvious at first, there is a difference between a stock index and a stock exchange. An index is a weighted average of several stock prices, such as the Dow Jones Industrial Average or the S&P 500. An exchange is a physical location and associated electronic equipment where stocks are bought and sold. They serve as clearinghouses for transactions and as a facility for the issuance and redemption of securities. In order for a stock to trade on an exchange, it must be listed there, which makes the company subject to the exchange's listing requirements relating to size and transparency. While most exchanges publish an index, relatively few indices are exchanges. The NASDAQ is a popular index and is also an exchange, as is the larger NYSE.
  
  

NASDAQ

• The NASDAQ began as a listing of over-the-counter small-cap stocks, and became famous as the first electronic trading system. It is the premier North American exchange for tech-related companies. The NASDAQ exchange frequently receives the most intraday volume of any stock exchange in the world. With more than 3,200 listed companies, the NASDAQ Composite Index is regarded as the best broad cross-section of the tech industry. The NASDAQ 100 consists of roughly the largest hundred stocks by market capitalization and volume listed at the NASDAQ exchange, and includes companies incorporated in about a dozen different countries, including the United States. The NASDAQ exchange is owned by the NASDAQ OMX Group, which trades under the ticker symbol NDAQ. In 2008, NASDAQ OMX Group purchased the Philadelphia Stock Exchange as well.
  
  

NYSE

• The NYSE Composite Index, NYA, measures the performance of all common stocks listed on the New York Stock Exchange. While most of these stocks are included in other indices, such as the Dow or S&P, not all the stocks in those indices trade at the NYSE. Thus, the NYSE Composite is another cross section of the stock market that can be tracked and traded. At the end of 2004, the NYSE Composite consisted of over 2,000 U.S. and non-U.S. stocks, excluding ETFs and closed-end funds that also trade at the exchange. The composite index of NYSE-listed common stocks is weighted according to market capitalization and adjusted to smooth out the effects of new share issues, buybacks, new listings and delistings. The NYSE is owned by NYSE Euronext, a publicly traded company listed on the NYSE as ticker symbol NYX. In 2008, NYSE Euronext acquired the American Stock Exchange, or AMEX.