NASDAQ is relatively young but has been giving NYSE a run for its money. NASDAQ operates very differently than the NYSE as it works on a method called the double auction method. In this method the highest bidder competes with all the bidders on a buy and same goes for a sell.
In NASDAQ much like in the real world each broker or the dealer as you may want to call it has an inventory of shares which they are willing to sell and that means that they can easily assume that their inventory along with other broker’s inventory will be taken care of. In effect each order if fulfilled based on how much inventory or shares you are holding.
As an example I will show how a limit order works and how a market order works. Limit means that you impose a limit on the price you are willing to pay for the stock. In the market order you are willing to pay any price which is currently in the market. For example if you need to buy 1000 shares then the dealer will give 500 shares at a price you quoted but the next 500 shares you will get at a price which can be anything based on the price the dealer procures the additional shares for you.
NASDAQ has a way of providing you with the bid offer, ask size and size of each offer by way of SOES which is the Small Order Execution System. A broker who helps create a market for buyers and sellers is known as the market maker.
NASDAQ is geared towards providing the small investors a favorable trading environment. On the other hand American Exchange also provides some options for small investors.
The there is OTCBB which trades in only penny stocks, but trading on OTCBB can be very very expensive and very volatile.