You’ve probably heard of Nasdaq if you keep up with the financial news or have started a retirement account. Tech powerhouses like Apple, Google, and Amazon all call the Nasdaq their home, making it the second-largest stock market in the world behind the New York Stock Exchange (NYSE).
More than four thousand companies, including many of today’s largest organizations, are now listed on the Nasdaq exchange since its establishment in 1971. Any portfolio containing Nasdaq-listed companies will rise and fall in value following the economy.
“Nasdaq is known for being progressive, which is why many technology companies choose to list on the exchange.”
If you’re unfamiliar with the Nasdaq, what is it, and how does it perform? Let’s peek at one of the world’s most well-known stock exchanges.
List of Contents
What Is Nasdaq: The Definition
While the New York Stock Market (NYSE) is the world’s premier stock and securities exchange, the Nasdaq ranks second. None of its transactions ever occur in an actual venue between buyers and sellers; instead, they are executed entirely online via dealers. Compared to other stock markets, Nasdaq is preferred by IT companies and fast-growing enterprises.
The Nasdaq is unique in that it lacks a traditional trading desk. Through a streamlined computer network, all of its shares are traded electronically. That has always been its goal.
Several of the world’s largest publicly traded corporations are listed on the Nasdaq. Although the Nasdaq is a marketplace for a wide variety of businesses, many of its listings are associated with the high-tech software, technology, and internet industries. Apple, Amazon, Microsoft, Meta (previously Facebook), Gilead Sciences, Starbucks, Tesla, and Intel are just a few of the major companies whose stocks are traded on the Nasdaq. Stocks on this market are more volatile than those on other exchanges since they attract high-growth companies.
Listed and over-the-counter (OTC) stocks are traded on the Nasdaq, the world’s second-largest stock exchange by market capitalization. There are typically four or five letters in a Nasdaq ticker symbol.
The Nasdaq has a long and illustrious history of firsts in many fields. It was the first to provide electronic trading, host its data in the cloud, and license its technologies to other exchanges.
With its headquarters in Stockholm, OMX ABO operates the Nordic and Baltic regional exchanges that amalgamated with Nasdaq in 2008. Exchange-traded funds, debt, structured goods, derivatives, and commodities are all available to trade through the new business, Nasdaq, Inc.
How the Nasdaq Works
The Nasdaq was conceived as a platform for providing immediate automated quotations. Over-the-counter (OTC) trading has been facilitated by Nasdaq since its inception, and the market is commonly referred to as an OTC market because of this. Over time, it integrated robotized trading platforms capable of producing information on volumes and transactions. Online trading was pioneered by this exchange, making it a pioneer in its own right.
Investors that use Nasdaq’s electronic exchanges must go through dealers, sometimes known as “market makers,” to complete their trades rather than engage in auction-style bidding.
Nasdaq Trading Hours
The Nasdaq, like the New York Stock Exchange, is active from 9:30 a.m. to 4:00 p.m. Nasdaq provides both “pre-market” and “post-market” sessions as a trading venue. There are two distinct times for trading on the stock market: 4 a.m. to 9:30 a.m. Eastern Time (ET) and 4 p.m. to 8 p.m.
Nasdaq Listing Requirements
Among other requirements, a corporation must meet the following before its stocks or securities would be accepted for listing on the Nasdaq.
- Have a particular level of financial stability, liquidity, and corporate governance
- Must hold a valid SEC registration to operate (SEC)
- Maintain a minimum of three market makers.
- Conform to other criteria related to the size of your business and the volume of your trades
When a company applies to be listed, it could take anywhere from four to six weeks for the application to be processed.
Nasdaq U.S. Market Tiers
Global Select Market: This index is a weighted average of U.S. and foreign stock prices determined by market capitalization. These companies have met Nasdaq’s stringent requirements to be included. Nasdaq’s Listing Qualifications Department conducts annual reviews of Global Market listings and promotes those that meet the criteria to Nasdaq’s Global Select Market.
Global Market: Company shares registered on Nasdaq exchanges domestically and abroad are included in the Global Market. This market is classified as a “mid-cap.”
Capital Market: Companies with lesser market capitalizations are now listed on Nasdaq’s Capital Market, formerly known as the SmallCap Market.
Nasdaq vs. NYSE
There are some key differences between the New York Stock Exchange and the Nasdaq, the two largest stock exchanges in the United States.
| NASDAQ | NYSE |
|---|---|
| Completely digital trading platform | Use both virtual and physical markets to make deals |
| It’s a dealer’s market, not a consumer’s. | Online auction platform that facilitates one-on-one business deals |
| Tighter, more constrained market (tech-heavy) | More comprehensive, more expansive market |
| More erratic and expansion-oriented | Relatively stable |
Nasdaq Performance
Since most Nasdaq stocks are in the technology sector, the index has done exceptionally well over the past 25 years. The NASDAQ-100 index, which tracks the performance of the 100 most liquid stocks on the NASDAQ stock exchange, has returned 196.31% over the past five years and 552.24% over the past ten years as of November 3, 2021. Also, the Composite Index showed a return of 171.64% over five years and 444.12% over ten years.
Nasdaq is a stock market where businesses can publicize their stock. Through their brokers, investors gain access to these exchanges and engage in the purchase and sell transactions in shares of listed companies. Nasdaq is widely recognized as a pioneer in the financial industry, as it was the first electronic stock exchange in the world. Now, you may trade shares in many of the world’s most successful companies through the Nasdaq.
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Read more: Stocks
Source: TheBalance