Understanding the NASDAQ stock market: An overview of its history and how it works

Published on: Mon Mar 20 2023

Understanding the NASDAQ stock market: An overview of its history and how it works

The NASDAQ Stock Exchange is a global electronic marketplace for the purchase and sale of securities. It was established in 1971 as the world's first electronic stock exchange and has since grown to become the world's second-largest stock exchange by market capitalization, trailing only the New York Stock Exchange (NYSE). In this blog, we'll look at the NASDAQ's history, how it works, and its significance in the financial world.

The NASDAQ has a long history.

The National Association of Securities Dealers (NASD), a self-regulatory organization for the over-the-counter (OTC) market, established/formed the NASDAQ in 1971.The OTC market was a network of dealers who traded securities among themselves without the use of a centralized exchange. The NASDAQ was established by the NASD to provide investors with a more transparent and efficient trading platform for over-the-counter (OTC) securities.

The NASDAQ began as a platform for technology and growth companies that were not yet ready to list on the NYSE. These firms were drawn to the NASDAQ because it provided them with greater flexibility and lower costs than the NYSE. The NASDAQ became known for its high-tech focus in the 1980s, and it was home to many of the era's leading/prominent technology companies, including Microsoft, Apple, and Intel.

How the NASDAQ Works

The NASDAQ is an electronic marketplace, which means that all trading takes place online rather than on a physical trading floor. Securities buyers and sellers submit electronic orders to the NASDAQ trading system, which matches/fits orders based on price and time priority.

There are two primary market tiers on the NASDAQ: the NASDAQ Global Select Market and the NASDAQ Global Market. Companies listed on the NASDAQ Global Select Market must meet stricter financial and liquidity standards than those listed on the NASDAQ Global Market. The NASDAQ also has a third tier, the NASDAQ Capital Market, for smaller and emerging companies.

The NASDAQ, in addition to traditional stock trading, operates/manages a number of other trading platforms, including options trading, futures trading, and ETF trading. It also offers investors and traders a variety of market data and analytics services.

Significance of the NASDAQ

The NASDAQ has played an important/essential role in the development and growth of the technology industry. The NASDAQ is home to many of the world's leading technology companies, including Amazon, Facebook, and Google. As a result, the NASDAQ has come to represent financial innovation and disruption.

The NASDAQ is also significant for its contribution to global economic growth. The NASDAQ companies span a wide range of industries, from biotechnology to telecommunications. These companies' success has helped to create jobs and drive economic growth around the world.

Another important/crucial aspect of the NASDAQ is its impact on financial markets. Because the NASDAQ is home to many of the world's leading technology companies, it is frequently regarded as a leading indicator of the broader economy. Changes in the performance of the NASDAQ can indicate changes in investor sentiment and have an impact/effect on the prices of other securities.

Conclusion

The NASDAQ Stock Market is an important component of the global financial system. It has a long history as an electronic trading pioneer and has contributed significantly to the growth of the technology industry. The NASDAQ's continued success demonstrates the power of financial innovation and disruption. As technology continues to reshape the way we live and work, it is likely that the NASDAQ will continue to be at the forefront of these changes.

Returns are subject to market risk.

Past performance do not assure future returns.

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