NASDAQ
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NASDAQ (originally an acronym for National Association of Securities Dealers Automated Quotations system) is an American electronic stock market. It was founded in 1971 by the National Association of Securities Dealers (NASD), who divested it in a series of sales in 2000 and 2001. It is owned and operated by The Nasdaq Stock Market, Inc. (NASDAQ: NDAQ) the stock of which was listed on its own stock exchange in 2002. NASDAQ is the largest electronic screen-based equity securities market in the United States. With approximately 3,200 companies, it lists more companies and, on average, trades more shares per day than any other U.S. market.[1] The current chief executive officer is Robert Greifeld.
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[edit] History
- See also: Economy of New York City
When it began trading on February 8, 1971, it was the world's first electronic stock market. At first, it was merely a computer bulletin board system and did not actually connect buyers and sellers. The NASDAQ helped lower the spread (the difference between the bid price and the ask price of the stock) but somewhat paradoxically was unpopular among brokerages because they made much of their money on the spread. Over the years, NASDAQ became more of a stock market by adding trade and volume reporting and automated trading systems. NASDAQ was also the first stock market to advertise to the general public, highlighting NASDAQ-traded companies (usually in technology) and closing with the declaration that NASDAQ is "the stock market for the next hundred years."
Until 1987, most trading occurred via the telephone, but during the October 1987 stock market crash, market makers often didn't answer their phones. To counteract this, the Small Order Execution System (SOES) was established, which provides an electronic method for dealers to enter their trades. NASDAQ requires market makers to honor trades over SOES.[2]
On July 17, 1995, the NASDAQ Composite index closed above the 1,000 mark for the first time. The index peaked at an intra-day high of 5,132.52 on March 10, 2000, which signaled the beginning of the end of the dot-com stock market bubble. The index declined to half its value within a year, and finally found a bear market bottom at its intra-day low of 1,108.49 on October 10, 2002. While the index has gradually recovered since then, reaching a six-year monthly closing high above the 2,400 level on November 30, 2006, it is still (as of early 2007) trading for less than half of its peak value.
[edit] Merger attempt with London Stock Exchange
In December of 2005, the London Stock Exchange (LSE) rejected a £1.6 billion takeover offer from Macquarie Bank. The LSE described the offer as "derisory." It then received a bid in March of 2006 for £2.4 billion from NASDAQ, which was also rejected by the LSE. NASDAQ later pulled its bid, and less than two weeks later on April 11, 2006, struck a deal with LSE's largest shareholder, Ameriprise Financial's Threadneedle Asset Management unit, to acquire all of that firm's stake, consisting of 35.4 million shares, at £11.75 per share.[3] NASDAQ also purchased 2.69 million additional shares, resulting in a total stake of 15%. While the seller of those shares was undisclosed, it occurred simultaneously with a sale by Scottish Widows of 2.69 million shares.[4] The move was seen as an effort to force LSE to negotiate either a partnership or eventual merger, as well as to block other suitors such as NYSE Group, owner of the New York Stock Exchange.[5]
Subsequent purchases increased NASDAQ's stake to 29%, holding off competing bids for several months. However only a further 0.4% of shareholders accepted the offer by the deadline and therefore the offer was rejected [6] on February 10, 2007.
[edit] Business
NASDAQ allows multiple market participants to trade through its Electronic Communication Networks (ECNs) structure, increasing competition. The Small Order Execution System (SOES) is another NASDAQ feature, introduced in 1987, to ensure that in 'turbulent' market conditions small market orders are not forgotten but are automatically processed. With approximately 3,200 companies, it lists more companies and, on average, trades more shares per day than any other stock exchange in the world. It is home to companies that are leaders across all areas of business including technology, retail, communications, financial services, digging, transportation, media and biotechnology. NASDAQ is the primary market for trading NASDAQ-listed stocks.
[edit] Market Share
As of 1 March 2007, NASDAQ is the largest Electronic Communication Network system in terms of shares traded. Approximately two out of every seven shares traded on the American financial markets is traded on the system. For New York Stock Exchange-listed securities or Tape A, it accounts for about 14-15% of the shares traded. For Tape C securities, it accounts for approximately 45-50% of the trading volume. [7]
[edit] Fees
NASDAQ has a sliding fee system that offers lower liquidity removal fees and more favourable added-liquidity rebates based on how much trading volume the market participant executes on the NASDAQ system. For more information, refer to the pricing schedule link below
[edit] Quote availability
NASDAQ quotes are available at three levels. Level I shows the highest bid and lowest offer — the inside quote. Level II shows all public quotes of market makers together with information of market makers wishing to sell or buy stock and recently executed orders. Level III is used by the market makers and allows them to enter their quotes and execute orders.[8]
[edit] Indices
[edit] Markets
- NASDAQ Global Select Market
- NASDAQ Global Market
- NASDAQ Capital Market
[edit] See also
[edit] References
- ^ NASDAQ Performance Report. NASDAQ Newsroom. The Nasdaq Stock Market (2007-01-12). Retrieved on 2007-02-15.
- ^ Wells, Rob. "'Market for Next 100 Years' is 25", Associated Press.
- ^ Patrick, M., Lucchetti, A., Reilly, D., Taylor, E.. "Nasdaq Acquires 15% of LSE", The Wall Street Journal, 2006-04-11.
- ^ "Scottish Widows says has sold 2.7 mln LSE shares at 1,175 pence", Forbes, 2006-04-12.
- ^ Ortega, E.. "Nasdaq Buys 15 Percent Stake in LSE for $782 Million", Bloomberg News, 2006-04-11.
- ^ "LSE woos Tokyo after US bid fails]]".
- ^ Market Volume Summary.
- ^ Nasdaq Level I, Level II , Level III Quotes.
[edit] External links
• Dow Jones Industrial Average (30 large stocks; popular indicator) (ETF: DIA)
• NYSE Composite Index (all companies on the NYSE) (ETF: NYC)
• Nasdaq Composite Index (all companies on the NASDAQ; technology-heavy) (ETF: ONEQ)
• NASDAQ-100 Index (100 large NASDAQ non-financial stocks) (ETF: QQQQ)
• S&P 500 Index (500 large companies; general market analysis) (ETF: SPY)
• Russell 2000 Index (small-cap stocks) (ETF: IWM)
• Wilshire 5000 Index (total U.S. market) (ETF: TMW)
| Stock market | ||||
|---|---|---|---|---|
| Types of Stocks | ||||
| stock | Common stock | Preferred stock | Treasury stock | ||||
| Trading Stock | ||||
| Terms dealing with trading: | Market maker | specialist | |||
| Exchanges: | Stock exchange | List of stock exchanges | New York Stock Exchange | SEAQ | NASDAQ | American Stock Exchange | London Stock Exchange | Frankfurt Stock Exchange | Euronext | |||
| Stock valuation | ||||
| Trading Theories: | Dow Theory | Elliott Wave Theory | Fundamental analysis | Technical analysis | Mark Twain effect | | |||
| Stock Pricing: | Dividend yield |Gordon model | Income per share | Book value | Financial ratio | PE ratio | PEG ratio | Price/sales ratio | P/B ratio | Earnings yield | Beta coefficient | |||
| Stock Related Terms | ||||
| Dividend | Stock split | Growth stock | ||||
