The Ins and Outs of the Stock Market

 
When a company goes public, it lists its shares on a stock market, also called an exchange. Investors buy and sell those shares through their stockbrokers. Although the New York Stock Exchange (NYSE) is the biggest stock exchange, numerous other exchanges are in business in North America and around the world.
Getting listed on a stock exchange, also known as being publicly traded, can have numerous benefits for a company. Likewise, it can be detrimental to lose the listing, or to be on an inappropriate stock exchange.
Penny stocks trade on numerous exchanges, and which exchange can be your first clue as to the quality or legitimacy of the underlying company. Although you’ll rarely find a penny stock listed on the high-quality large cap exchanges, such as the New York Stock Exchange (NYSE), certain penny stock markets are vastly superior to the few questionable markets filled with questionable penny stock companies.
Companies enjoy listing on a reputable stock market because it gives them credibility and the greater visibility for the shares that comes with more popular markets makes it easier to raise funds when required. As well, being listed on a quality exchange usually results in a greater number of investors trading the shares, and this increased activity is typically beneficial to the share price.


Factors influencing what exchange a company lists on
The majority of publicly traded companies, and certainly all the more serious and professional ones, have a listing on a stock exchange. Before they trade, however, or before they work to move from one market to another, they must take several factors into account:
- Fees: The greater the benefit from the listing, the higher the fees will be for listing on the exchange. Companies may pay hundreds of thousands of dollars to be listed initially on the New York Stock Exchange, along with $5,000 to $40,000 in fees annually, depending on the company. A listing on markets with lower visibility costs considerably less.
- Listing requirements: Each exchange has its own requirements for any company interested in being listed. These requirements are not only for initial approval but are also ongoing. For example, some exchanges require that companies maintain minimum share price, minimum number of unique shareholders, or even a certain makeup of their board of directors. If a company fails to meet the requirements, the exchange won’t allow the company to list with it in the first place; if the company is already listed on the exchange,
the exchange may take action to remove the company from the exchange.
- Corporate obligations: Publicly traded companies must meet the obligations of the exchange upon which they trade. These obligations include meeting filing deadlines for financial reporting and having a board of directors. They are also required to work with an investor relations firm or individual who answers shareholder questions and performs related tasks.
 - Visibility:  A company should know what level of visibility it is trying to attain and the type of investors it wants to attract. If it wants to attract billions of dollars in investments from mutual funds, it needs to list on one of the major American stock exchanges. If it’s a Canadian penny stock, listing on the smaller and more relevant Toronto Venture Exchange may make more sense.
- Appropriate peers: Certain types of companies gravitate to specific stock markets. For example, the NASDAQ (which stands for National Association of Securities Dealers Automated Quotations, a name nobody ever uses) houses the majority of technology companies, while the American Stock Exchange (AMEX) includes many resource corporations. Although these divisions aren’t obligatory, a company may find better results when listed with its peers. I describe each of these stock markets in detail later in this website. Any penny stock needs to weigh the benefits of a stock market listing with the added costs and obligations. A smaller company may need much wider investor visibility but could have difficulty paying the fees or even being approved in the first place.
Fortunately, the sheer number and variety of exchanges usually means that a company can find an appropriate exchange to house its shares. In addition, as a company grows (or shrinks) it can leave one listing tier or stock market for another, to ensure that it strikes a good balance between requirements and benefits.
 Many companies, especially volatile penny stocks, have difficulty maintaining their listing requirements. The result can be that they lose that listing, in which case they generally trade on another stock exchange with easier requirements. For example, a company that can’t maintain the minimum share price for the NASDAQ may switch to the Over The Counter Bulletin Board (OTC-BB), which also happens to be owned by the same corporation. Before being delisted however, companies have a certain amount of time to meet the requirements and, therefore, maintain their listing.