NASDAQ

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NASDAQ Stock Market
Type Stock exchange
Location New York City, New York, United States
Founded February 4, 1971 (1971-02-04)
Owner NASDAQ OMX Group
Currency United States dollar
No. of listings 2,957 (December 2014)[1]
Market cap $8.5 trillion (July 2014)[2]
Website NASDAQOMX.com
Studio.

The NASDAQ Stock Market (Listeni/ˈnæzˌdæk/), commonly known as the NASDAQ, is an American stock exchange. In terms of market share and volume traded, it is the largest stock exchange in the U.S. The exchange platform is owned by The NASDAQ OMX Group, which also owns the OMX stock market network and several other U.S. stock and options exchanges.

History[edit]

Old Logo

In 1972, NASDAQ stood for National Association of Securities Dealers Automated Quotations.[3] NASDAQ was founded in 1971[4] by the National Association of Securities Dealers (NASD), which divested itself of NASDAQ in a series of sales in 2000 and 2001. NASDAQ is owned and operated by the The NASDAQ OMX Group, the stocks of which were listed on its own stock exchange beginning July 2, 2002, under the ticker symbol NDAQ.

When the NASDAQ began trading on February 8, 1971, it was the world's first electronic stock market. At first, it was merely a quotation system and did not provide a way to perform electronic trades.[5] The NASDAQ helped lower the spread (the difference between the bid price and the ask price of the stock) but was unpopular among brokerages which made much of their money on the spread.

NASDAQ eventually assumed the majority of major trades formerly executed by the over-the-counter (OTC) system of trading, although there are still numerous securities traded in this fashion. As late as 1987, the NASDAQ exchange was still commonly referred to as "OTC" in media and also in the monthly Stock Guides issued by Standard & Poor's 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, 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. During the October 1987 stock market crash, however, market makers often did not answer their phones. To remedy this, the Small Order Execution System (SOES) was established. SOES provides an electronic method for dealers to enter their trades. NASDAQ requires market makers to honor trades executed using SOES.

In 1992, NASDAQ joined with the London Stock Exchange to form the first intercontinental linkage of securities markets. The National Association of Securities Dealers spun off NASDAQ in 2000 to form a publicly traded company, the NASDAQ Stock Market, Inc.

In 2006, the status of NASDAQ was changed from a stock market to a licensed national securities exchange.[6]

To qualify for listing on the exchange, a company must be registered with the United States Securities and Exchange Commission (SEC), must have at least three market makers (financial firms that act as brokers or dealers for specific securities) and must 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, speculation developed that NASDAQ OMX and Intercontinental Exchange (ICE) could mount a counter-bid of their own for NYSE. NASDAQ OMX could be looking to acquire the American exchange's cash equities business, ICE the derivatives 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."[7] Late in the month, Nasdaq was reported to be considering asking either ICE or the Chicago Merc to join in what would probably have to be, if it proceeded, an $11–12 billion counterbid.[8]

The European Association of Securities Dealers Automatic Quotation System (EASDAQ) was founded originally as a European equivalent to NASDAQ. It was purchased by NASDAQ in 2001 and became NASDAQ Europe. Operations were shut down, however, 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.[9]

On June 18, 2012, NASDAQ became a founding member of the United Nations Sustainable Stock Exchanges initiative on the eve of the United Nations Conference on Sustainable Development (Rio+20).[10]

In 2013, NASDAQ OMX was approached by private equity firm Carlyle Group about taking the exchange operator private, but the talks fell apart over a disagreement on price.[11]

Quote availability[edit]

NASDAQ quotes are available at three levels:

  • Level 1 shows the highest bid and lowest offer— inside quote.
  • Level 2 shows all public quotes of market makers together with information of market dealers wishing to sell or buy stock and recently executed orders.[12]
  • Level 3 is used by the market makers and allows them to enter their quotes and execute orders.[13]

Trading schedule[edit]

NASDAQ has a pre-market session from 4:00am 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).[14]

Indexes[edit]

Market tiers[edit]

NASDAQ has three different market tiers:

  • NASDAQ Capital Market (small cap) is an equity market for companies that have relatively small levels of market capitalization. Listing requirements for such "small cap" companies are less stringent than for other Nasdaq markets that list larger companies with significantly higher market capitalization.[15]
  • NASDAQ Global Market (mid cap) is made up of stocks that represent the Nasdaq Global Market. The NASDAQ Global Market consists of 1,450 stocks that meet Nasdaq's strict financial and liquidity requirements, and corporate governance standards. The Global Market is less exclusive than the Global Select Market.[16]
  • NASDAQ Global Select Market (NASDAQ-GS Large cap) is a market capitalization-weighted index made up of U.S.-based and international stocks that represent the NASDAQ Global Select Market Composite. The NASDAQ Global Select Market consists of 1,200 stocks that meet Nasdaq's strict financial and liquidity requirements and corporate governance standards. The Global Market Select is more exclusive than the Global Market. Every October, the Nasdaq Listing Qualifications Department reviews the Global Market Composite to determine if any of its stocks have become eligible for listing on the Global Select Market.[17][18]

See also[edit]

References[edit]

  1. ^ "NASDAQ Companies - NASDAQ.com". NASDAQ. Retrieved December 14, 2014. 
  2. ^ World-exchanges.org Archived 13 February 2011 at WebCite
  3. ^ Frequently Asked Questions. NASDAQ.com. NASDAQ, n.d. Web. 23 December 2001. Archived 13 February 2011 at WebCite
  4. ^ Terrell, Ellen. "History of the American and NASDAQ Stock Exchanges". LOC.gov. Library of Congress Business Reference Services. Retrieved 27 April 2013. 
  5. ^ 'this automated quotation system quickly matured far beyond its original quote-service roots, evolving into what it is today' | http://www.nasdaq.com/help/help-faq.aspx | Retrieved February 27, 2012
  6. ^ Walsh, Michelle. "Nasdaq Stock Market Becomes A National Securities Exchange; Changes Market Designations". 
  7. ^ De la Merced, Michael J., "Nasdaq and ICE Hold Talks Over Potential N.Y.S.E. Bid", The New York Times Dealbook, February 18, 2011, 12:46 pm. Retrieved February 18, 2011.
  8. ^ Fraser, Michelle E., "Nasdaq May Ask CME or ICE for Help in NYSE Counterbid, WSJ Says", Bloomberg, February 26, 2011 9:30 AM ET. Retrieved March 1, 2011.
  9. ^ "Easdaq Makes A Comeback As Equiduct". Archived from the original on February 13, 2011. 
  10. ^ "Sustainable Stock Exchanges Initiative: Exchanges listing over 4,600 companies commit to promoting sustainability". Sustainable Stock Exchanges initiative. Reuters. Retrieved 13 May 2014. 
  11. ^ http://www.reuters.com/article/2013/02/11/us-nasdaq-carlyle-idUSBRE91A0UM20130211
  12. ^ "Order Book, Level 2 Market Data, and Depth of Market". daytrading.about.com. Archived from the original on February 13, 2011. 
  13. ^ "NASDAQ Level III Quote". 
  14. ^ "NASDAQ Trading Schedule". NASDAQ.com. Retrieved 20 April 2014. 
  15. ^ "Definition of 'Nasdaq SmallCap Market', now known as Nasdaq Capital Market". investopedia.com. before 25 August 2013. Retrieved 25 August 2013.  Check date values in: |date= (help)
  16. ^ "Definition of 'NASDAQ Global Market Composite'". investopedia.com. before 25 August 2013. Retrieved 25 August 2013.  Check date values in: |date= (help)
  17. ^ "Definition of 'NASDAQ Global Select Market Composite'". investopedia.com. before 25 August 2013. Retrieved 25 August 2013.  Check date values in: |date= (help)
  18. ^ Pinto, Jerald E; Henry, Elaine; Robinson, Thomas R.; Stowe, John D. (2010). Equity Asset Valuation. CFA Institute Investment Series 27 (2 ed.). John Wiley & Sons. p. 6. ISBN 9780470579657. Retrieved 2013-03-04. [...] NASDAQ-GS stands for 'Nasdaq Global Select Market,' [...] 

External links[edit]