The NASDAQ Stock Market commonly known as the NASDAQ, is an American stock exchange.It is the benchmark index for U.S. technology stocks. NASDAQ is the second-largest stock exchange in the world by market capitalization, after the New York Stock Exchange. The exchange platform is owned by NASDAQ OMX Group, which also owns the OMX stock market network.
Headquartered in New York, Nasdaq OMX operates 26 markets – primarily equities, and also including options, fixed income, derivatives and commodities – as well as three clearinghouses and five central securities depositories in the U.S. and Europe. Its cutting-edge trading technology is used by 70 exchanges in 50 countries.
Back in 1971, NASDAQ stood for National Association of Securities Dealers Automated Quotations. NASDAQ 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 stocks of which was listed on its own stock exchange beginning July 2, 2002, under theticker symbol NDAQ. It is regulated by the Financial Industry Regulatory Authority (FINRA), the successor to the NASD.
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 give a way to actually do electronic trades. 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 was the successor to the over-the-counter (OTC) system 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.
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. It is an index of more than 3,000 stocks listed on the Nasdaq exchange that includes the world’s foremost technology and biotech giants such as Apple, Google, Microsoft, Oracle, Amazon, Intel and Amgen. However, its exchange-traded fund tracks the large-cap NASDAQ-100 index, which was introduced in 1985 alongside the NASDAQ 100 Financial Index.
Small Order Execution System (SOES)
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.
In 1992, it joined with the London Stock Exchange to form the first intercontinental linkage of securities markets. NASD spun off NASDAQ in 2000 to form a publicly traded company, the NASDAQ Stock Market, Inc.
In 2006, NASDAQ changed from stock market to licensed national securities exchange.
On November 8, 2007, NASDAQ bought the Philadelphia Stock Exchange (PHLX). PHLX is the oldest stock exchange in America—having been in operation since 1790.
To qualify for listing on the exchange, a company must be registered with the United States Securities and Exchange
Commission (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.
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, but operations were shut down 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.
In 2013, NASDAQ was approached by private equity firm Carlyle Group about taking the exchange operator private, but the talks fell apart over a disagreement on price.