What is NASDAQ

It is a stock exchange that is based in New York in America. The expansion of NASDAQ is National Association of Securities Dealers Automated Quotations. It is the second largest stock exchange in the United States next to New York stock exchange it terms of value of securities. Many IT companies of great recognition appear on NASDAQ. Examples being Apple, Microsoft, Sun Microsystems, Cisco etc.

NASDAQ is quite different from NYSE, because the former’s stock trading was and is always done electronically. For the first few decades it was done through telephone and electronic boards, but now it uses fully automated system of trading. Usually for every stock exchange there is some opening and closing time. NASDAQ’s selling and buying time starts at 9.30 am to 4.00 pm EST on working days.

Trading in NASDAQ will be initiated by stock brokers who will be acting on behalf of their clients. These brokers place their calls with person’s called market makers. It’s this market maker and the broker who will negotiate the prices. NASDAQ does not have a central location unlike other stock exchanges. The market makers of NASDAQ are spread all over the world and they trade over internet and telephone.

As the brokers and market makers trade for stocks directly instead of physically being at the exchange, it is also called as over the counter. This term refers to direct trading as a customer who picks up his or her goods directly from the market. NASDAQ’s primary index is termed as NASDAQ 100, which refers to the top 100 companies in market value that trade with them. These companies listed in NASDAQ 100 are from different sectors, like financial sector, IT sector, sometimes even other ITES companies as well.

NASDAQ 100 is not fixed, every year it can add or terminate companies from this list depending on their ranking in market value. The term index refers to a group of stocks that can range from a dozen companies to lakhs. Every public company is permitted to list their shares to be traded in only one stock exchange. This happens when the company is initially looking for its shares to be floated in the public. Occasionally a company can also drift its shares to another stock exchange.

The history of NASDAQ is dated back to 1971, now the exchange has about 3000 plus public limited companies that are trading. There are certain general securities that are eligible for index addition, like ordinary shares, security class, trading stocks, real estate investments, partnership interest with certain limitations etc.  Apart from this there are certain index that are not included like warrants, imitative securities, debentures that are convertible, preferred stocks etc.

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