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What NASDAQ means ?
The Nasdaq Stock Market is a major stock exchange based in New York City. It’s the busiest stock trading place in the U.S. by the number of trades, and it’s second in size when it comes to the total value of stocks traded, right after the New York Stock Exchange.
Nasdaq, Inc. owns the Nasdaq Stock Market and manages other stock markets in the U.S. and Europe.
Focus: Nasdaq is well-known for trading many technology company stocks, but it also includes companies from sectors like healthcare, finance, entertainment, and retail.
Companies: The exchange lists both American companies and international ones, with a notable number from China and Israel.
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HISTORY
“Nasdaq” originally stood for the National Association of Securities Dealers Automated Quotations. It was created in 1971 by a group called the National Association of Securities Dealers, which is now known as FINRA.
When Nasdaq started on February 8, 1971, it was the first stock market to operate electronically. At that time, it only provided stock quotes and didn’t allow people to buy or sell stocks electronically.
Over time, the Nasdaq Stock Market took over many of the big trades that used to be done through the over-the-counter (OTC) trading system, but OTC trading is still used for some securities. Up until 1987, people often called Nasdaq “OTC” in news reports and stock guides. As time went on, Nasdaq grew and became more like a traditional stock market by adding features like trade reporting and automated trading systems.
In 1981, Nasdaq handled 37% of all the shares traded in the U.S. stock market. By 1991, this had increased to 46%. In 1992, Nasdaq partnered with the London Stock Exchange to create the first connection between stock markets in different continents.
In 1996, the SEC (Securities and Exchange Commission) released a report accusing Nasdaq market makers of manipulating stock prices. They were accused of avoiding quotes in small increments (like 1/8 of a dollar) to make the difference between buying and selling prices bigger. This was done to make more money. After the report, new rules were introduced to improve how Nasdaq handled stock orders.
In 1998, Nasdaq became the first stock market in the U.S. to operate online, using the slogan “the stock market for the next hundred years.” During the dot-com bubble (a period in the late 1990s when technology companies were very popular), many tech companies chose to list their stocks on Nasdaq.
The main measure of Nasdaq’s performance is the NASDAQ Composite index, which has been around since the market started. There’s also an exchange-traded fund called QQQ that follows another index called the NASDAQ-100, which includes 100 of the biggest companies listed on Nasdaq. This index started in 1985. Additionally, there’s the NASDAQ Financial-100 Index, which tracks the top 100 financial companies on Nasdaq by their market value.
Nasdaq Stock Market’s recent history and key events:
2000-2002: On March 10, 2000, Nasdaq’s main index, the NASDAQ Composite, hit a high of 5,132.52 but then dropped significantly. By April 17, 2000, it had fallen to 3,227, and over the next two and a half years, it dropped by 78% from its peak.
2000-2002: In 2000 and 2001, the organization that managed Nasdaq sold its shares in the exchange. On July 2, 2002, Nasdaq Inc. became a public company, meaning it started selling shares to the public.
2006-2007: In 2006, Nasdaq was officially recognized as a national securities exchange. In 2007, it merged with OMX, a company running stock markets in Nordic countries, and became known as NASDAQ OMX Group.
Listing Requirements: For a company to be listed on Nasdaq, it must be registered with the SEC, have at least three market makers, and meet specific requirements regarding assets, capital, and shareholders.
2011: There was talk of Nasdaq and another company, Intercontinental Exchange (ICE), potentially making a bid for the NYSE Euronext, a major stock exchange. At that time, Nasdaq and ICE were smaller compared to NYSE Euronext.
2005: Nasdaq bought Instinet, a trading company, for $1.9 billion. They kept some parts of Instinet and sold others to different investors.
2001-2003: Nasdaq bought EASDAQ, a European market similar to Nasdaq, and renamed it Nasdaq Europe. However, Nasdaq Europe closed in 2003 after the dot-com bubble burst. It later became part of Equiduct and was bought by Börse Berlin.
2012: Nasdaq OMX joined the United Nations Sustainable Stock Exchanges Initiative to support sustainable practices in stock markets.
2016: Adena Friedman became Nasdaq’s CEO, the first woman to lead a major U.S. stock exchange. Nasdaq made $272 million in revenue from listing companies that year.
2018: The SEC ruled that Nasdaq and the New York Stock Exchange hadn’t properly justified their increasing fees for market data.
2020: Nasdaq decided to remove four Chinese companies from its indexes in response to a U.S. executive order.
Nasdaq 100 futures are traded on the CME (Chicago Mercantile Exchange) while its derivatives, E-Mini Nasdaq 100 and Micro E-Mini Nasdaq 100 futures are traded on the EMiniCME.
Nasdaq provides quotes at three levels:
Level 1: Shows the best (highest) price someone is willing to pay for a stock and the lowest price someone is willing to sell it for. This is the basic information about stock prices.
Level 2: Provides more detailed information, including all public quotes from different market makers, as well as information about dealers wanting to buy or sell the stock and details about recent trades.
Level 3: Used by market makers themselves. It allows them to set their own quotes and execute trades directly.
Trading schedule
The Nasdaq Stock Market has three trading sessions each day, based on Eastern Time:
Premarket: 7:00 a.m. to 9:30 a.m. – This is when trading happens before the regular market opens.
Normal Trading: 9:30 a.m. to 4:00 p.m. – This is the main trading time when most of the stock trading occurs.
Postmarket: 4:00 p.m. to 8:00 p.m. – This is when trading continues after the regular market closes.
The Nasdaq is open for trading on about 253 days each year.
Market tiers
The Capital Market (NASDAQ-CM small cap) is a part of Nasdaq where smaller companies with lower market value (compared to larger companies) can list their stocks. The rules for these smaller companies to get listed are less strict than those for larger companies on other Nasdaq markets. This helps smaller companies gain access to public trading.
The Global Market (NASDAQ-GM) includes mid-sized companies listed on Nasdaq. It has around 1,450 stocks that meet Nasdaq’s financial and governance standards, but it is not as selective as the Global Select Market, which has even stricter requirements.
The Global Select Market (NASDAQ-GS) is a part of Nasdaq for large, well-established companies, both from the U.S. and other countries. It includes around 1,200 stocks that meet Nasdaq’s high standards for financial health, trading activity, and company management. This market is more exclusive than the Global Market. Each October, Nasdaq reviews the stocks on the Global Market to see if any qualify to move up to the more exclusive Global Select Market
comparison between Nasdaq and the NYSE:
Nasdaq is the second largest stock exchange in the U.S., with a market value of $19 trillion. It’s about $5.5 trillion smaller than the NYSE.
Nasdaq is much newer than the NYSE. Nasdaq started in 1971, while the NYSE has been around for much longer.
Nasdaq :
- From the start, Nasdaq has been fully electronic.
- Uses a dealer system where dealers set and update prices throughout the day.
- Costs between $55,000 and $80,000 to list a stock.
- Known for newer companies, especially those in technology, which can be seen as riskier investments
NYSE :
- Before the COVID-19 pandemic, the NYSE used both a physical trading floor with live people and an electronic system.
- Uses an auction system where buyers and sellers submit bids, and transactions happen when their bids match.
- Listing a stock is much more expensive, with a minimum fee of $150,000.
- Known for listing older, more established companies.
Disclaimer: This information is for educational purposes only and not investment advice. Always consult with a financial advisor before making any investment decisions.
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