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The NASDAQ (acronym of National Association
of Securities Dealers Automated Quotations) is an
American stock exchange. It is the largest electronic screen-based
equity securities trading market in the United States. With
approximately 3,200 companies, it lists more companies and
on average trades more shares per day than any other U.S.
market.[1]
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 in 2002, and is monitored by the Securities
and Exchange Commission (SEC).
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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.[2] Nasdaq-OMX group
as it's now known now controls and operates the NASDAQ stock market
in NYC, which is the second largest in the US; in addition, it now
operates eight stock exchanges in Europe and also holds 33.3% of
the Dubai Stock Exchange. It has a double-listing agreement with
OMX, which will render it more effective than the NYSE-Euronext
group in attracting new listings.
History
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 into New england.
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.[3]
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.[4]
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.[5]
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.[6]
NASDAQ lists
approximately 3,200 securities, of which 335 are non-U.S. companies
from 35 countries representing all industry sectors.[7] 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.[8] NasdaqOMX now has a dual listing agreement
with the Tel Aviv Stock Exchange.
Business
NASDAQ allows
multiple market participants to trade through its Electronic
Communication Networks (ECNs) structure, increasing competition.
The Small Order Execution System (SOES) is another NASDAQ feature,
introduced in 1987, to ensure that in 'turbulent' market conditions
small market orders are not forgotten but are automatically processed.
With approximately 3,200 companies, it lists more companies and,
on average, its systems trade more shares per day than any other
stock exchange in the world. NASDAQ will follow the New York Stock
Exchange in halting domestic trading in the event of a sharp and
sudden decline of the Dow Jones Industrial Average.[9]
Market
share
As of March
1, 2007, accounts for about 14-15% of the shares traded. For Tape
C securities, it accounts for approximately 45-98% of the trading
volume.[10]
Fees
NASDAQ has
a sliding fee system that offers lower liquidity removal fees
and more favorable added-liquidity rebates based on how much trading
volume the market participant executes on the NASDAQ system.
Quote
availability
NASDAQ quotes
are available at three levels. Level I shows the highest bid and
lowest offer the inside quote. Level II shows all public quotes
of market makers together with information of market makers wishing
to sell or buy stock and recently executed orders. Level III is
used by the market makers and allows them to enter their quotes
and execute orders.[11]
Trading
Schedule
The NASDAQ
Stock Market Trading Sessions (Eastern Time)[12]
- Pre-Market
Trading Hours from 7:00 a.m. to 9:30 a.m.
- Market
Hours from 9:30 a.m. to 4:00 p.m.
- After-Market
Hours from 4:00 p.m. to 8:00 p.m.
Indexes
Markets
References
External
links
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