The National Association of Securities Dealers Automated Quotations, commonly known as NASDAQ, is a computerized system that provides brokers and dealers with price quotations for securities traded over the counter (OTC) as well as for many New York Stock Exchange (NYSE)-listed securities. Since its inception, NASDAQ has become one of the most significant stock exchanges in the world.
History and Evolution
- Inception (1971): NASDAQ was officially launched by the National Association of Securities Dealers (NASD) in 1971 to combat inefficiencies and lack of transparency in the OTC market.
- Becoming a Stock Market (1991): Transitions from a quotation system to a stock market, trading over 2,500 securities.
- Technological Advancements: NASDAQ introduced electronic trading and automated systems, setting new standards in trading speed and efficiency.
- Global Reach: Now a global financial marketplace, NASDAQ lists a vast array of companies, including some of the largest technology giants.
Key Features
Over-the-Counter (OTC) Securities
Securities not listed on major exchanges like NYSE traditionally traded directly between two parties without a centralized exchange.
New York Stock Exchange-listed Securities
Many securities listed on NYSE are also quoted on NASDAQ, creating a more competitive and diverse marketplace.
Functionality
- Quotation System: Real-time price information for thousands of securities, making it easier for investors to trade.
- Electronic Trading: Eliminates the need for a physical trading floor, reducing costs and increasing efficiency.
- Market Makers: Multiple market makers competition to provide the best bid and ask prices, enhancing liquidity.
Global Influence
NASDAQ has profound influence in global markets. Hosting some of the world’s technology giants like Apple, Microsoft, and Amazon, it serves as a barometer for tech sector performance.
Comparison with Other Exchanges
NASDAQ vs. NYSE
- Trading Mechanism: While NASDAQ is fully electronic, NYSE combines electronic trading with traditional floor trading.
- Listing Companies: NASDAQ tends to list more technology and startup companies, whereas NYSE lists older, more established companies.
- Market Model: NASDAQ operates as a dealer market, NYSE as an auction market.
NASDAQ vs. Other OTC Markets
NASDAQ represents a more structured and transparent trading environment compared to other OTC markets.
Applications and Use Cases
For Brokers and Investors
- Provides real-time price quotations.
- Facilitates easier access to a wide range of securities.
- Enhances investment decision-making.
For Companies
- Easier process for newly public companies to get listed.
- Greater visibility and liquidity for listed companies.
- Attracts more technology-driven companies.
FAQs
What makes NASDAQ different from other stock exchanges?
How does NASDAQ influence global markets?
Why choose NASDAQ for listing?
Related Terms
- Electronic Trading: The process of trading securities via computerized systems.
- Market Maker: A firm or individual that provides liquidity by buying and selling securities on a regular basis at publicly quoted prices.
- Securities: Tradable financial assets such as stocks, bonds, and derivatives.
References
- NASDAQ Official Website
- “The NASDAQ Story,” by XYZ Publishing, 2020.
- “How Modern Stock Exchanges Work,” by ABC Financial Publications, 2021.
Summary
NASDAQ stands at the forefront of electronic trading, revolutionizing how securities are bought and sold. With its deep influence on global markets, real-time price quotations, and focus on tech-driven companies, it continues to be a central player in the world of finance, shaping the future of trading and investments.
