The NASDAQ Stock Market, known as
NASDAQ, is an
American stock exchange. The full form is National Association of Securities and Dealers Automated Quotation.It is the largest
electronic screen-based
equity securities trading market in the United States. With approximately 3,700 companies and corporations, it has more trading volume per hour than any other stock exchange in the world.
History
It was founded in 1971 by the
National Association of Securities Dealers (NASD), who
divested themselves of it in a series of sales in 2000 and 2001. It is owned and operated by the
NASDAQ OMX Group, the stock of which was listed on its own stock exchange beginning July 2, 2002, under the
ticker symbol , and is regulated by the
Securities and Exchange Commission (SEC).
With the completed purchase of the
Nordic-based operated exchange
OMX, following its agreement with
Borse 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 -- the second largest exchange in the United States. It also operates eight stock exchanges in Europe and holds one-third of the Dubai Stock Exchange. It has a double-listing agreement with OMX, and will compete with
NYSE Euronext group in attracting new listings.
When the NASDAQ
stock exchange began trading on February 8, 1971, the NASDAQ 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 (OTC) and the "
Curb Exchange" systems 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 Corporation.
[Standard & Poor's Corporation, Stock Guide, Year End 1987 issue]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 advertise to the general public, 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, which has been published since its inception. However, its exchange-traded fund tracks the large-cap
NASDAQ-100 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,
market makers often didn't answer their phones. To counteract this, the
Small Order Execution System (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 to form the first intercontinental linkage of
securities markets. NASDAQ's 1998 merger with the
American Stock Exchange formed the
NASDAQ-Amex Market Group, and by the beginning of the 21st century it had become the largest electronic stock market (in terms of both dollar value and share volume) in the United States.
NASD spun off NASDAQ in 2000 to form a
publicly traded company, the
NASDAQ Stock Market, Inc.On November 8, 2007, NASDAQ bought the
Philadelphia Stock Exchange (PHLX) for US$652,000,000. 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 SEC, have at least three
market makers (financial firms that act as brokers or dealers for specific securities), and meet minimum requirements for assets, capital, public shares, and shareholders. NasdaqOMX now has a dual listing agreement with the Tel Aviv Stock Exchange.
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 makers together with information of market makers wishing to sell or buy stock and recently executed orders.
- Level 3 is used by the market makers and allows them to enter their quotes and execute orders.
Trading schedule
NASDAQ has a
pre-market session from 07:00am to 09:30am, a normal trading session from 09:30am to 04:00pm and a post-market session from 04:00pm to 08:00pm (all times in EST).
Indices
Markets
See also
