NASDAQ

NASDAQ

Overview
The NASDAQ Stock Market, also known as the NASDAQ, is an American stock exchange
Stock exchange
A stock exchange is an entity that provides services for stock brokers and traders to trade stocks, bonds, and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and...

. "NASDAQ" originally stood for "National Association of Securities Dealers Automated Quotations". It is the second-largest stock exchange by market capitalization
Market capitalization
Market capitalization is a measurement of the value of the ownership interest that shareholders hold in a business enterprise. It is equal to the share price times the number of shares outstanding of a publicly traded company...

 in the world, after the New York Stock Exchange
New York Stock Exchange
The New York Stock Exchange is a stock exchange located at 11 Wall Street in Lower Manhattan, New York City, USA. It is by far the world's largest stock exchange by market capitalization of its listed companies at 13.39 trillion as of Dec 2010...

.
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Encyclopedia
The NASDAQ Stock Market, also known as the NASDAQ, is an American stock exchange
Stock exchange
A stock exchange is an entity that provides services for stock brokers and traders to trade stocks, bonds, and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and...

. "NASDAQ" originally stood for "National Association of Securities Dealers Automated Quotations". It is the second-largest stock exchange by market capitalization
Market capitalization
Market capitalization is a measurement of the value of the ownership interest that shareholders hold in a business enterprise. It is equal to the share price times the number of shares outstanding of a publicly traded company...

 in the world, after the New York Stock Exchange
New York Stock Exchange
The New York Stock Exchange is a stock exchange located at 11 Wall Street in Lower Manhattan, New York City, USA. It is by far the world's largest stock exchange by market capitalization of its listed companies at 13.39 trillion as of Dec 2010...

. As of January 13, 2011, there are 2,872 listings. The NASDAQ has more trading volume than any other electronic stock exchange in the world.

History



It was founded in 1971 by the National Association of Securities Dealers (NASD), who divested
Divestment
In finance and economics, divestment or divestiture is the reduction of some kind of asset for either financial or ethical objectives or sale of an existing business by a firm...

 themselves of it in a series of sales in 2000 and 2001. It is owned and operated by the NASDAQ OMX Group
NASDAQ OMX Group
NASDAQ OMX Group, Inc. is a United States public company that owns and operates the NASDAQ stock market and eight European stock exchanges in Armenia plus the Nordic and Baltic regions under the OMX banner...

, the stock of which was listed on its own stock exchange beginning July 2, 2002, under the ticker symbol
Ticker symbol
A stock symbol or ticker symbol is a short abbreviation used to uniquely identify publicly traded shares of a particular stock on a particular stock market. A stock symbol may consist of letters, numbers or a combination of both. "Ticker symbol" refers to the symbols that were printed on the ticker...

 . It is regulated by the Financial Industry Regulatory Authority
Financial Industry Regulatory Authority
In the United States, the Financial Industry Regulatory Authority, Inc., or FINRA, is a private corporation that acts as a self-regulatory organization . FINRA is the successor to the National Association of Securities Dealers, Inc. ...

 (FINRA).

With the incomplete purchase of the Nordic
Nordic countries
The Nordic countries make up a region in Northern Europe and the North Atlantic which consists of Denmark, Finland, Iceland, Norway and Sweden and their associated territories, the Faroe Islands, Greenland and Åland...

-based operated exchange OMX
OMX
OMX AB is a Swedish-Finnish financial services company, formed in 2003 through a merger between OM AB and HEX plc and is now a part of the NASDAQ OMX Group since February 2008.It has two divisions, OMX Exchanges, which operates eight stock exchanges mainly in the Nordic and Baltic...

, following its disagreement with Borse Dubai
Borse Dubai
Borse Dubai is a stock exchange in the United Arab Emirates.It is the holding company for Dubai Financial Market and NASDAQ Dubai...

, NASDAQ is poised to capture 67% of the controlling stake in the aforementioned exchange, thereby inching ever closer to taking over the company and creating a trans-atlantic powerhouse. The group, now known as Nasdaq-OMX, controls and operates the NASDAQ stock exchange in New York City
New York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...

 – the second largest exchange in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

. It also operates eight stock exchanges in Europe and holds one-third of the NASDAQ Dubai stock exchange. It has a double-listing agreement with OMX, and will compete with NYSE Euronext group in attracting new listings. Bernie Madoff is a co-founder of Nasdaq, a former Chairman of the NASD.

When the NASDAQ stock exchange
Stock exchange
A stock exchange is an entity that provides services for stock brokers and traders to trade stocks, bonds, and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and...

 began trading on February 8, 1971, it was the world's first electronic stock market. At first, it was merely a computer bulletin board system and did not actually connect buyers and sellers. The NASDAQ helped lower the spread (the difference between the bid price and the ask price of the stock) but somewhat paradoxically was unpopular among brokerages because they made much of their money on the spread.

NASDAQ was the successor to the over-the-counter
Over-the-counter (finance)
Within the derivatives markets, many products are traded through exchanges. An exchange has the benefit of facilitating liquidity and also mitigates all credit risk concerning the default of a member of the exchange. Products traded on the exchange must be well standardised to transparent trading....

 (OTC) system of trading. As late as 1987, the NASDAQ exchange was still commonly referred to as the OTC in media and also in the monthly Stock Guides issued by Standard & Poor's
Standard & Poor's
Standard & Poor's is a United States-based financial services company. It is a division of The McGraw-Hill Companies that publishes financial research and analysis on stocks and bonds. It is well known for its stock-market indices, the US-based S&P 500, the Australian S&P/ASX 200, the Canadian...

 Corporation.

Over the years, NASDAQ became more of a stock market by adding trade and volume reporting and automated trading systems. NASDAQ was also the first stock market in the United States to start trading online. Nobody before them had ever done this, highlighting NASDAQ-traded companies (usually in technology) and closing with the declaration that NASDAQ is "the stock market for the next hundred years." Its main index is the NASDAQ Composite
Nasdaq Composite
The Nasdaq Composite is a stock market index of the common stocks and similar securities listed on the NASDAQ stock market, meaning that it has over 3,000 components. It is highly followed in the U.S. as an indicator of the performance of stocks of technology companies and growth companies. ...

, which has been published since its inception. However, its exchange-traded fund tracks the large-cap NASDAQ-100
NASDAQ-100
The NASDAQ-100 is a stock market index of 100 of the largest non-financial companies listed on the NASDAQ. It is a modified capitalization-weighted index. The companies' weights in the index are based on their market capitalizations, with certain rules capping the influence of the largest components...

 index, which was introduced in 1985 alongside the NASDAQ 100 Financial Index.

Until 1987, most trading occurred via the telephone, but during the October 1987 stock market crash
Black Monday (1987)
In finance, Black Monday refers to Monday October 19, 1987, when stock markets around the world crashed, shedding a huge value in a very short time. The crash began in Hong Kong and spread west to Europe, hitting the United States after other markets had already declined by a significant margin...

, market maker
Market maker
A market maker is a company, or an individual, that quotes both a buy and a sell price in a financial instrument or commodity held in inventory, hoping to make a profit on the bid-offer spread, or turn. From a market microstructure theory standpoint, market makers are net sellers of an option to be...

s often didn't answer their phones. To counteract this, the Small Order Execution System
Small Order Execution System
The small-order execution system was a system to facilitate clearing trades of low volume on NASDAQ. It has since be phased out and is no longer necessary.-Establishment:SOES was first introduced in December 1988 for 25 stocks....

 (SOES) was established, which provides an electronic method for dealers to enter their trades. NASDAQ requires market makers to honor trades over SOES.

In 1992, it joined with the London Stock Exchange
London Stock Exchange
The London Stock Exchange is a stock exchange located in the City of London within the United Kingdom. , the Exchange had a market capitalisation of US$3.7495 trillion, making it the fourth-largest stock exchange in the world by this measurement...

 to form the first intercontinental linkage of securities markets
Capital market
A capital market is a market for securities , where business enterprises and governments can raise long-term funds. It is defined as a market in which money is provided for periods longer than a year, as the raising of short-term funds takes place on other markets...

. NASD spun off NASDAQ in 2000 to form a publicly traded company, the NASDAQ Stock Market, Inc.

In 2006 NASDAQ changed from stock market to licensed national exchange.

On November 8, 2007, NASDAQ bought the Philadelphia Stock Exchange
Philadelphia Stock Exchange
Philadelphia Stock Exchange , now known as NASDAQ OMX PHLX, is the oldest stock exchange in the United States, founded in 1790. It is now owned by NASDAQ OMX and located at 1900 Market Street, in Center City Philadelphia.-History:...

 (PHLX) for US$652 million. PHLX is the oldest stock exchange in America—having been in operation since 1790.

To qualify for listing on the exchange, a company must be registered with the United States Securities and Exchange Commission
United States Securities and Exchange Commission
The U.S. Securities and Exchange Commission is a federal agency which holds primary responsibility for enforcing the federal securities laws and regulating the securities industry, the nation's stock and options exchanges, and other electronic securities markets in the United States...

 (SEC), have at least three market maker
Market maker
A market maker is a company, or an individual, that quotes both a buy and a sell price in a financial instrument or commodity held in inventory, hoping to make a profit on the bid-offer spread, or turn. From a market microstructure theory standpoint, market makers are net sellers of an option to be...

s (financial firms that act as brokers or dealers for specific securities) and meet minimum requirements for assets, capital, public shares, and shareholders.

In February, 2011, in the wake of an announced merger of NYSE Euronext with Deutsche Börse
Deutsche Börse
Deutsche Börse AG is a marketplace organizer for the trading of shares and other securities. It also is a transaction services provider. It gives companies and investors access to global capital markets. It is a joint stock company and was founded in 1993. The headquarters are in Frankfurt,...

, speculation developed that Nasdaq and IntercontinentalExchange
IntercontinentalExchange
IntercontinentalExchange, Inc., known as ICE, is an American financial company that operates Internet-based marketplaces which trade futures and over-the-counter energy and commodity contracts as well as derivative financial products...

 (ICE) could mount a counter-bid of their own for NYSE. Nasdaq could be looking to acquire the American exchange's cash equities business, ICE the derivatives
Derivative (finance)
A derivative instrument is a contract between two parties that specifies conditions—in particular, dates and the resulting values of the underlying variables—under which payments, or payoffs, are to be made between the parties.Under U.S...

 business. As of the time of the speculation, "NYSE Euronext’s market value was $9.75 billion. Nasdaq was valued at $5.78 billion, while ICE was valued at $9.45 billion." Late in the month, Nasdaq was reported to be considering asking either ICE or the Chicago Merc
Chicago Mercantile Exchange
The Chicago Mercantile Exchange is an American financial and commodity derivative exchange based in Chicago. The CME was founded in 1898 as the Chicago Butter and Egg Board. Originally, the exchange was a non-profit organization...

 to join in what would be probably have to be, if it proceeded, an $11-12 billion counterbid.

EASDAQ


EASDAQ (European Association of Securities Dealers Automatic Quotation System) was a European electronic securities exchange headquartered in Brussels. Founded originally as a European equivalent to NASDAQ, it was purchased by NASDAQ in 2001 and became NASDAQ Europe. In 2003, it shut down operations as a result of the burst of the dot-com bubble. In 2007, NASDAQ Europe was revived as Equiduct and is currently operating under Börse Berlin
Berliner Börse
Börse Berlin AG is a stock exchange based in Berlin, Germany, founded in 1685 through an edict of Great Elector Friedrich Wilhelm and is one of the oldest exchanges in Germany...

.

Quote availability


NASDAQ quotes are available at three levels:
  • Level 1 shows the highest bid and lowest offer—the inside quote.
  • Level 2 shows all public quotes of market maker
    Market maker
    A market maker is a company, or an individual, that quotes both a buy and a sell price in a financial instrument or commodity held in inventory, hoping to make a profit on the bid-offer spread, or turn. From a market microstructure theory standpoint, market makers are net sellers of an option to be...

    s together with information of market dealers wishing to sell or buy stock and recently executed orders.
  • Level 3 is used by the market maker
    Market maker
    A market maker is a company, or an individual, that quotes both a buy and a sell price in a financial instrument or commodity held in inventory, hoping to make a profit on the bid-offer spread, or turn. From a market microstructure theory standpoint, market makers are net sellers of an option to be...

    s and allows them to enter their quotes and execute orders.

Trading schedule


NASDAQ has a pre-market
Extended hours trading
After-hours trading is stock trading that occurs after the traditional trading hours of the major exchanges, such as the New York Stock Exchange and the Nasdaq Stock Market. Since 1985, the regular trading hours in America have been from 9:30 a.m. to 4:00 p.m...

 session from 7:00am to 9:30am, a normal trading session from 9:30am to 4:00pm and a post-market session from 4:00pm to 8:00pm (all times in ET
Eastern Time Zone
The Eastern Time Zone of the United States and Canada is a time zone that falls mostly along the east coast of North America. Its UTC time offset is −5 hrs during standard time and −4 hrs during daylight saving time...

).

Indices

  • NASDAQ-100
    NASDAQ-100
    The NASDAQ-100 is a stock market index of 100 of the largest non-financial companies listed on the NASDAQ. It is a modified capitalization-weighted index. The companies' weights in the index are based on their market capitalizations, with certain rules capping the influence of the largest components...

  • NASDAQ Bank
  • NASDAQ Biotechnology Index
    NASDAQ Biotechnology Index
    The NASDAQ Biotechnology Index includes securities of NASDAQ-listed companies classified according to the Industry Classification Benchmark as either Biotechnology or Pharmaceuticals.- Criteria :...

  • NASDAQ Composite
    Nasdaq Composite
    The Nasdaq Composite is a stock market index of the common stocks and similar securities listed on the NASDAQ stock market, meaning that it has over 3,000 components. It is highly followed in the U.S. as an indicator of the performance of stocks of technology companies and growth companies. ...


Markets

  • NASDAQ Capital Market
    NASDAQ Capital Market
    Originally called the NASDAQ Small Cap Market, NASDAQ announced a name change to the NASDAQ Capital Market on September 27, 2005.The NASDAQ Capital Market exists for securities of smaller, less-capitalized companies that do not qualify for inclusion in the Nasdaq National Market....

  • NASDAQ Global Market
  • NASDAQ Global Select Market
  • NASDAQ PORTAL Market

See also


  • ACT (NASDAQ)
    ACT (NASDAQ)
    ACT, or Automated Confirmation of Transactions, is system for reporting and clearing trades in the over-the-counter and NASDAQ securities markets...

  • NASDAQ futures
    NASDAQ futures
    NASDAQ futures are investment instruments which allow an investor to hedge with or speculate on the future value of various components of the NASDAQ market index.-In General:...

  • NASDAQ MarketSite
    NASDAQ MarketSite
    NASDAQ MarketSite is the physical presence of the NASDAQ stock market. Located in Times Square in New York City, it occupies the North West corner of the bottom of the Condé Nast Building, located at 4 Times Square...


External links