What is NASDAQ?
The second-largest stock exchange in the world is the Nasdaq. The Nasdaq has approximately 3,700 public businesses listed for trading, with a market capitalization of over $19 trillion—just shy of the $25.5 trillion listed market cap of the New York Stock Exchange (NYSE). The Nasdaq gained notoriety as the first entirely computerized market, and numerous top tech firms continue to favor it.
How NASDAQ Works
Historically, Stock exchanges are considered buildings where traders buy and sell their securities. Market participants would negotiate prices face-to-face on a physical trading floor where transactions would take place. However, the Nasdaq was drastically different when it was first established in 1971. There was no trading floor and no in-person trading; all transactions happened over a network of computer computers.
The NASDAQ’s past
The National Association of Securities Dealers founded the NASDAQ in New York City in 1971. Becoming the first stock exchange in the world to be run entirely electronically was the primary motivation for its inception. Although it initially prohibited computerized trading, it did offer automatic stock quotes. However, securities brokers disliked the function since it helped to reduce the bid-ask spread.
Most significant OTC trades soon moved to the NASDAQ from other exchanges. The NASDAQ was the first exchange to provide online trading in 1998. With a focus on leveraging technology in finance, NASDAQ Inc. keeps growing its operations beyond a stock exchange.
The NASDAQ opens for trading at 9:30 am, just like the New York Stock Exchange. And 4:30 pm EST. Moreover, the NASDAQ provides pre-market (4:00–9:30 am) and post-market trading (4:00–8:00 pm).
The NASDAQ is renowned for listing equities from technological companies. Amazon, Alphabet (Google), Facebook, Microsoft, and Apple are well-known companies whose stocks are traded on the NASDAQ. A stock must meet particular finance, governance, and liquidity requirements to be listed on the NASDAQ.
How Does the NASDAQ Earn Money?
The NASDAQ offers several connected services that consumers must pay for. The customers range from huge tech businesses that pay various fees to be listed on the exchange to retail investors who pay transaction fees to buy and sell stocks. Corporate, information, market, and technology services comprise NASDAQ Inc.’s four primary business segments.
Corporate Services: Fees are collected from companies that desire to list on the NASDAQ.
Information services: Offers users a variety of market data and market research to help market participants stay informed.
Market Services: All transactions are subject to brokerage and clearance fees.
Services in the technology field that deal with governance, investor relations, and public relations.
Most securities exchanges now operate entirely electronically, and very few still maintain any physical trading floor. One of the less well-known effects of the Covid-19 outbreak has been the closure of the few physical trading floors still in operation.
But regardless of whether the buying and selling occur in real life or online, it is made possible through a network of investment companies known as market makers. When you opt to purchase shares of stock, these companies execute the trades you order by holding and exchanging the individual securities listed on any stock market. The company claims almost 2 billion shares, with a market value of nearly $12 trillion, trade on Nasdaq’s electronic exchange every day.