Original subtitles

Hey guys and this model we're going to be covering.

What's an exchange.

Now we've already talked about markets.

A market is a general term that relates to where stocks are trading.

Now when we're talking about exchanges we're actually talking about the exact location where the trades

are being executed.

So imagine this when I say grocery stores I'm talking about markets.

If I go and say this specific store exactly meaning whole foods or Wal-Mart these are exchanges.

So both of these exchanges where you can go buy food from are grocery stores which is the market.

So same thing with stocks.

You have the stock market but within the stock market you have different exchanges that you can go to

so different stores physical locations that you can go buy and sell stocks from.

So New York Stock Exchange is an exchange it's a location that you can go to buy and sell stocks.

Nasdaq is another location where you can go and buy stocks.

The stock markets but there are different exchanges.

Right.

So just so you understand I'm going to give a brief history lesson if you want to call it for how

stock exchanges were born.

So initially back in the time let's say in the in 19 or in the 17th hundreds

Almost 18th hundreds, when you wanted to buy or sell a stock you would have to find somebody who wanted to

buy or sell that same stock from you.

At the exact prices that you were willing to buy or sell it at.

So if you want to buy 100 shares of General Electric's you had to find somebody who wanted to sell his

shares of General Electrics.

And you want to find somebody who wants to sell them at the price that you're willing to buy them from

him.

So it wasn't easy.

People back then would have to put it in the journal or try and find somebody on the

streets ask around.

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It wasn't simple.

You didn't have a computer where you can just put it in and you match with somebody else.

So it was a bit of a hassle.

So what people used to do back then they would meet.

There were these regular meet ups that people would have in the town halls and in the centers of the

city and they would meet and they would trade stocks with one another.

So one of those locations was in New York.

People would meet their every Thursday, either at noon or 2 p.m. something that they would meet every week.

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And these were groups of financially savvy people they had stocks in different companies and they would

like to meet so they can buy and sell those stocks with one another easily instead of going through

the hassle of trying to find a counterparty.

Now this became very popular and a lot of people started meeting with them and that specific group that

was in New York started growing bigger and bigger and bigger as more and more people started to come

on that day to trade stocks.

Then they started meeting more than once a week.

Then more than twice a week.

So what happened is a group of these traders who were meeting who started who actually started this

who were meeting their first before everybody else came, started to see that it became a hassle dealing

with so many people there were too many people coming around.

So they decided to meet and sign an agreement with one another called the buttonwood agreement.

Now they called it an agreement because the meetup was always underneath a tree called the buttonwood

tree.

I don't know why it's call that.

And in that agreement it's said we're not going to trade stocks with anybody else but ourselves.

OK.

There were 24 guys.

We're only going to trade with ourselves.

And if somebody else wants to buy or sell stocks from us we're going to charge him a commission of a

quarter or percent

So that's how we're going to do it.

So that way it stops becoming as hectic and we can profit off of them and then we know everybody's going

to have to buy and sell stocks from us because we have the most stocks.

And we're a group of people that are going to have the majority of the stocks at this location so people

have to go through them.

Now that worked out very well for them.

They moved from under the tree to the coffee shop next door.

And again that agreement was made in 1792.

That's when they signed that up.

And just a year later they moved from that coffee shop and they bought the building right in front which

is what is now known as The New York Stock Exchange.

So that's how the New York Stock Exchange was born and these 24 people were the 24 original brokers.

And again there's going to be another module about what a broker is but a broker is somebody

who you

you have to go through to buy or sell the security.

And these were the 24 original brokers and there's more brokers obviously

but that's the same concept where you got to call your broker and he buys it and sells it for

you.

So people would have to go see them and they would either buy or sell the stocks for that person with

another broker.

Now today

there's three main exchanges that exist.

There's the New York Stock Exchange,

there is Nasdaq, and there's Amex.

New York Stock Exchange is the biggest and most demanding exchange.

Now the way you're going to see it is an exchange is like a store.

And to have your product in a store, the store has to accept having it.

Same thing with exchanges, if you want your stock to trade as an exchange you have to go ask the exchange

for your product to be listed on that exchange.

So, if Snapchat wants to be on an exchange they got to go ask the exchange, they go see New York

and tell them "Hey can we put our stocks on your shelves so people can come and buy it here on this exchange?"

New York has to accept them.

New York is a very demanding store.

It's a very demanding exchange.

They have the most demanding criteria out of all the exchanges.

So you've got to be a really big...

And when I say demanding it means they're looking at the size of your company you've got to have a big

company.

You've got to have a minimum amount of employees your price has to be over a certain price.

Your stock has to trade a certain amount of times every day.

So they have criteria.

Now the second exchange is Nasdaq. Nasdaq is less demanding is very known for having tech companies.

So most tech companies are on the Nasdaq exchange.

Different stocks trade on different exchanges

They don't trade on all the exchanges.

Again it's like having an iPhone if you want to buy an iPhone.

You can go to Wal-Mart to buy it maybe, but you can go to the iPhone store to buy it.

So you can buy it from that store.

Same thing with stocks you can buy different companies at different exchanges.

Some companies very rarely are interlisted on more than one exchange but mostly they are going to be

on one exchange.

So when somebody tells you "Hey where's the stock trading at?"

"It's trading on New York or trading on Nasdaq."

They're talking about which store is it trading at.

Where do I have to go if I want to buy at this store or that store.

Now the third exchange is Amex. Amex is an exchange that caters to ETFs - Exchange Traded Funds.

Now ETF is something we're going to get into in another course in another module but most ETFs are going

to be on the AMEX exchange. So these are the three exchanges that you need to get familiar with

for all the stocks that trade in the United States. Now, different countries are going to have different

exchanges that you're going to have to look up.