NASDAQ is a stock market where technology related stocks are traded. NASDAQ had 2,872 companies listed as of January 13, 2011. NASDAQ has two main stock indexes, the NASDAQ composite, which they have had since the company was founded, and the large cap index NASDAQ-100 which was added in 1985.
NASDAQ-OMX, the company that runs the NASDAQ stock exchange, also run OMX, the London Stock Exchange and seven other European stock exchanges. They also own one third of the Dubai Stock Exchange. NASDAQ became NASDAQ-OMX after the Merger with the Swedish OM group. OMX and NASDAQ has a double listing agreement.
The name NASDAQ can trace its origin to the original name “National Association of Securities Dealers Automated Quotations”. NASDAQ was founded in 1971 one but became a household name during the IT bubble. It was for a long time referred to as the OTC in the media due to the over the counter system it replaced. This practice ended in the late eighties, early nineties.
All trading on NASDAQ is completely electronic and it is the largest electronic stock exchange in the world. It was also the first electronic exchange when it was formed in 1971. Later, it became the first stock market with an automated trading system. Back in 1971, it was simply a bulletin board where trades could be negotiated. It was not until much later that the trading was automated. NASDAQ helped lower the spread by making the market more effective, but this made them disliked by many brokers who made a lot of money on the spread on regular stock markets.
NASD – National Association of Securities Dealers
NASDAQ was formed by the National Association of Securities Dealers (NASD). The NASD was the predecessor to the Financial Industry Regulatory Authority, Inc., or FINRA, which is often mistaken for a government agency but in reality is a private organization that performs financial self-regulation for member brokerage firms and exchange markets. NASD divested in NASDAQ in the year 2000, and two years later the company NASDAQ Stock Market, Inc was listed on NASDAQ under the ticker symbol NASDAQ:NDAQ. NASDAQ is regulated by FINRA. In 2006, they changed licensing from stock market to licensed national exchange.
The 1987 stock market crash played an important role in the rise of NASDAQ due to the fact that until then a large amount of the trading was conducted over the phone. During the crash many brokers did not answer their phones, which meant that the need for an automated system was highlighted as people could not get a hold of their broker to sell or buy stock. In the wake of this, the Small Order Execution System (SOES) was created which allowed dealers to enter their trades in an electronic system. NASDAQ required these transactions to be honored by the market makers.
Buying and selling stock on NASDAQ is easy since most of the world’s stock brokers facilitate trade on this market. This especially true in Europe and in the English speaking world. The commissions charged for trading on NASDAQ might be higher than those you pay when trading in national stock. Some brokers will allow you to trade with stocks on NASDAQ directly in an electronic platform, while others will require you to call your broker to make international purchases. If you live in the United States almost all brokers will allow you to use an electronic platform on your computer or smart phone.