Introduction of different American financial markets

Among the many markets in the United States, two will be of particular interest. These are the two most important: the NYSE (New York Stock Exchange) where the securities of the country’s largest and oldest companies are traded (Coca Cola, Boeing…) and the NASDAQ (National Association of Securities Dealers Automated Quotation system) made popular by companies like Microsoft, Intel or Cisco. The latter market, traditionally known for its young and growing technology companies, actually includes companies from all sectors. The financial reporting rules are less restrictive and it attracts many companies.

The financial markets regulator, the equivalent of our AMF, is represented by the SEC (Securities and Exchange Commission) in the United States. This is the place to turn to if you have any problems with the markets, your brokers, etc. The American markets are open from 3:30 pm to 10:00 pm, which allows you to devote yourself to them in the evening. Furthermore, these trading hours are extended thanks to systems such as the ECN (Electronic Communication Network) which replace the standard market system.

Market indices

Each market has its own benchmark indexes. For the NYSE, this is the Dow Jones Industrial Average, commonly known as the Dow Jones. It is composed of thirty of the country’s largest stocks. Recently, two Nasdaq stocks, Microsoft and Intel, were added.

This index was born in the spring of 1896, originally composed of 12 industrial stocks, it evolved and integrated 20 stocks in 1916, then its final number of 30 in 1928. It is amazing to see that this index has been listed daily since its first publication in the Wall Street Journal, on October 7, 1896. A fine example of longevity! There are also derivative Dow Jones indices such as the “Dow Jones Transportation Average”, which specializes in transport sector stocks, and the “Dow Jones Utility Average”, which deals with energy sector companies. The Nasdaq has two main indices: the Nasdaq Composite, which takes into account all the companies on the market (about 5000) and the Nasdaq 100, limited to the 100 largest capitalizations of the Nasdaq.

The Market Makers

One of the particularities of the Nasdaq is to be a market which is similar to the OTC. Intermediaries are in charge of animating the quotations and carrying out the exchanges, they are called Market Makers. These financial intermediaries, of which there are over 500, are responsible for executing your orders on the market.

Order Book

The illustration opposite represents an order book on a Nasdaq stock, it is based on a sophisticated quotation system that the Americans call “Level II”. If the columns “Bid” and “Ask” represent respectively the best requests and the best offers of securities, the column which interests us here is the one named “Name”. In fact in this column the name of the Market Maker is identified by a code. This is fundamentally different from the system we are used to, here it is intermediaries who act for you on the market and the orders are not anonymous. Moreover the “depth” of readability of the order book is not limited to the 5 best limits.