The Difference Between the Stock Market & Stock Exchange

Although the terms "stock market" and "stock exchange" are somewhat interchangeable in normal conversation, there are some differences in the meanings of the terms. The stock market is a broad entity covering a wide range of market activities and companies. The stock exchanges are one part of the stock market system.

"Stock market" is the general term to cover the organized trading of stocks. The stock market includes stock exchanges, the over-the-counter (OTC) market and electronic trading systems. A stock exchange is a company or organization that promotes the trading of stocks through listing services and requirements, tools to bring buyers and sellers together, and systems to track prices and sales data.

The two major stock exchanges in the U.S. are the New York Stock Exchange (NYSE) and the Nasdaq stock exchange. The stock exchanges are the location for the majority of stock market activity. Stocks can also trade on the OTC market and electronic communications networks (ECNs). All of these entities make up the stock market, while only the NYSE and Nasdaq are classified as stock exchanges.

The stock exchanges have listing requirements for companies to list their stocks and to stay listed. Most individual and institutional investors buy only exchange-listed stocks, so it is important for companies to be exchange-listed if they want to grow their market value. The two U.S. stock markets make up the majority of stock trading volume and value of stocks. The New York Stock Exchange is the largest in the U.S. and the world measured by the value of the listed stocks. Nasdaq is the home for many smaller and technology-oriented companies.

Stock exchanges are business themselves and make profits from providing a venue for stock buying and selling. The exchanges also provide additional services such as data feeds, dividend payment processing and providing stock indexes. The stock exchanges are corporations with stocks that trade on their own exchanges. The Nasdaq OMX group trades under the stock symbol NDAQ, and NYSE Euronext has the symbol NYX.

In general conversation the terms "stock market" and "stock exchange" are often interchanged. The stock exchanges are separate companies that promote the orderly flow of stock buying and selling. The stock market is all stock trading through various avenues. Investors are more interested in the results of individual stocks, mutual and exchange-traded funds, and the various stock market indexes.