The Nasdaq Stock Market, commonly referred to as Nasdaq, is one of the largest and most influential securities exchanges in the world.
Based in the United States, it was founded in 1971 and is known for its electronic trading system, which revolutionized the way stocks were traded, making the market more accessible, efficient, and transparent. Unlike traditional exchanges with a physical trading floor, Nasdaq’s operations were electronic, making it a pioneer in modern securities trading.
Today, Nasdaq stands out as one of the most important financial exchanges in the world, with a unique focus on technology and innovation. A lot of technology stocks are traded on Nasdaq, and many of the world’s leading tech companies, including Apple, Microsoft, Alphabet (Google), Meta (Facebook), Tesla, and Amazon, are listed on this exchange.
As the home of many of the world’s leading tech companies, Nasdaq continues to play a pivotal role in the global economy, driving growth and innovation in the 21st century.
History
Nasdaq was established as the world’s first electronic stock market, enabling investors to trade securities through a computerized system rather than on a physical trading floor. This innovation made trading faster, more efficient, and more accessible to a broader range of investors.
Nasdaq started as part of the National Association of Securities Dealers (NASD), now known as the Financial Industry Regulatory Authority (FINRA), and was designed to provide an automated quotation system for over-the-counter (OTC) stocks.
The Nasdaq stock market commenced operations on February 8, 1971, and quickly gained popularity due to its transparent trading and reduced bid-ask spreads. Over the years, Nasdaq has grown in prominence, particularly as the home for many high-tech companies that have driven the digital age.
The early days of Nasdaq
In the beginning, Nasdaq was just a “quotation system” and could not be used directly for carrying out electronic trades. Later, Nasdaq assumed the majority of major trades that had been executed by the over-the-counter (OTC) system.
Over the years, Nasdaq grew and evolved, adding features such as trade and volume reporting, and automated trading systems. By 1981, Nasdaq traded 37% of the U.S. securities market´s total shares. Ten years later, tha number had grown to 46%.
The first intercontinental linkage of capital markets
The world´s first intercontinental linkage of capital markets was established in 1992, as the Nasdaq Stock Market linked up with the London Stock Exchange.
Nasdaq becomes the first stock market in the U.S. to trade online
The first stock market in the U.S. to trade online was Nasdaq and this step was taken in 1998.
Dot-com boom and dot-com burst
The dot-com boom boosted Nasdaq and the NASDAQ Composite stock market index went sky-high in the late 1990s. On March 10, 2000, the NASDAQ Composite peaked at 5,132.52. By April 27, it was down to 3,227, as the bubble had burst. In the next 30 moths, it fell 78% from its March 2000 peak.
Nasdaq, Inc. becomes a public company
In 2000-2001, FINRA (formerly NASD) sold their shares in Nasdaq.
On July 2, 2002, Nasdaq Inc. made its Initial Public Offering (IPO) and became a public company.
Nasdaq becomes a securities exchange
In 2006, Nasdaq changed from being a stock market to being a licensed national securities exchange.
Merging with OMX
Nasdaq merged with OMX in 2007. OMX was a notable exchange operator in Europe, with a focus on the Nordic countries.
Key Features
A Fully Electronic Exchange
Nasdaq operates as a fully electronic exchange, utilizing an automated system for buying and selling stocks. This system allows for high-speed trading, a high level of transparency, and lower trading costs.
Nasdaq supports a variety of order types, allowing traders to execute complex trading strategies efficiently.
Technology Focus
Nasdaq is especially known for being a hub for technology and innovation-driven companies. It hosts some of the largest and most successful technology firms in the world, such as Google (now Alphabet), Facebook (now Meta), and Tesla. The focus on technology has made Nasdaq the preferred exchange for companies in sectors like software, biotech, and renewable energy.
Market Makers
Nasdaq uses market makers to provide liquidity and ensure that trades can be executed swiftly. These firms commit to buying and selling securities.
Indices
Nasdaq is associated with several key stock indices:
- Nasdaq Composite: Includes almost all stocks listed on Nasdaq, offering a broad view of the market, particularly the tech sector. This index is as old as Nasdaq.
- Nasdaq-100: A subset of the Nasdaq Composite, this index includes 100 of the largest (by market cap) non-financial companies, showcasing the performance of leading tech giants. This index was established in 1985.
- Nasdaq Financial-100: Includes the top-100 (by market cap) companies listed on Nasdaq in the financial service industry, e.g. banking, insurance, mortgages, and securities trading. It was created in 1985 as the sister index to the more widely followed Nasdaq-100.
- Nasdaq Biotechnology Index: Focuses on companies engaged in biotechnology and pharmaceuticals, reflecting trends and performance in the life sciences sector.
Questions & Answers about Nasdaq
Where is Nasdaq located?
Nasdaq is located in New York City, United States.
Coordinates: 40.7565°N 73.98576°W
When was Nasdaq founded?
Nasdaq was founded on February 8, 1971.
How many companies are listed on Nasdaq?
In February 2024, the number of listings was well over 4,000.
Are only U.S. companies listed on Nasdaq?
No, both United States and foreign firms are listed on Nasdaq, including a lot of companies headquartered in China or Israel.
The trading currency is United States dollars.
Which companies can be listed on Nasdaq?
To be listed on Nasdaq, a company must fullfil many requirements. Here are a few examples:
- The company must be listed with the United States Securities and Exchange Commission (SEC).
- The company must have at least three market makers.
- The company must meet the minimum Nasdaq requirements regarding shareholders, public shares, assets, and capital.
What is the combined market valuation for the companies listed on Nasdaq?
In February 2024, the combined market cap exceeded 23.400 trillion USD.
Why is it called Nasdaq?
NASDAQ was founded by the National Association of Securities Dealers (NASD), and the name NASDAQ was an acronym for National Association of Securities Dealers Automated Quotations (NASDAQ). Today, Nasdaq is used as the full name, and it is no longer written in capital letters.
Ownership
The Nasdaq exchange is owned by Nasdaq, Inc., a United States-based multinational financial services corporation.
Nasdaq, Inc is a public company listed on Nasdaq. It is traded as Nasdaq: NDAQ.
Subsidiaries:
- International Securities Exchange
- Nasdaq
- Nasdaq Nordic
- Verafin
Stock exchanges in North America and Europe
- In the United States, Nasdaq, Inc. owns and operates Nasdaq, the Philadelphia Stock Exchange, and the Boston Stock Exchange.
- In Europe, Nasdaq owns and operates seven stock exchanges in the Nordic and Baltic regions: Nasdaq Copenhagen, Nasdaq Helsinki, Nasdaq Iceland, Nasdaq Stockholm,Nasdaq Riga,Nasdaq Tallinn, and Nasdaq Vilnius.
Impact and Importance
Nasdaq has played a crucial role in the democratization of trading, providing individual investors with greater access to the stock market and fostering the growth of high-tech companies. The exchange’s focus on technology and innovation has helped propel the digital revolution, making it a vital part of the global economy.
Nasdaq’s indexes, particularly the Nasdaq-100, are closely watched indicators of market health, particularly in the technology sector. The performance of these indexes often influences investor sentiment and can have significant effects on global markets.
As mentioned above, Nasdaq’s influence extends far beyond the United States. It has become a global symbol of technological innovation and financial growth, and many international companies choose to list on Nasdaq to gain access to a broad investor base and to be associated with Nasdaq.
Nasdaq also operates several other exchanges and financial markets around the world, including the Nasdaq OMX group, which runs exchanges in the Nordic and Baltic regions. This global presence solidifies Nasdaq’s role as a critical player in the global financial ecosystem.