What is NASDAQ?
American stock exchange is commonly known under the name of NASDAQ, which stands for National Association of Securities Dealers Automated Quotations. In terms of size and market capitalization it currently holds second position in the world, being smaller only than NYSE. Market capitalization of NASDAQ is valued at 6.831 billion US Dollars. It was the first stock exchange that allowed electronic trade of stocks and securities. Also, it has a great-looking NASDAQ MarketSite and its own trading index.
NASDAQ was established by the National Association of Securities Dealers in 1971. At the beginning, it was the first stock market in the world that used electronic quotations. It did not provide the ability to make electronic trades and was just a quotation system.
The huge jump in the development of the NASDAQ was made by the stock market crash in 1987. After this crash NASDAQ became one of the establishers of Small Orders Execution System, which allows to make orders electronically.
Such actions together with system of electronic quotations forced spread to become lower. This made it unpopular between brokers, since they made most of their profits on spreads. But the NASDAQ continued its development by adding volume and trade reporting and automated trading systems in the portfolio.
After increase of market power, NASDAQ decided to create the first first stock exchange with intercontinental connected securities market. This goal was achieved in 1992 via deal with London Stock Exchange.
Ten years later, NASDAQ separated itself from the NASD. Due to separation, NASDAQ was required to get its own national securities exchange licence. Licence was received in 2006 and since that time NASDAQ operates freely from NASD.
History of NASDAQ has a few major attempts to buy nasdaq. The most recent of them was made by Carlyle Group in 2013. The deal was canceled since parties did not agree on the price.
NASDAQ Market Tiers
NASDAQ has three main market tiers that differ in size of cap. Each of the tiers has its’ own requirements in terms of liquidity, finances and management of the company. It has to be said that requirements of NASDAQ are strict and getting into higher market tier requires hard work and increased performance.
- NASDAQ Capital Market (prev. NASDAQ SmallCap Market) or small cap. This market tier list companies with low level of market capitalization and has relatively soft requirements for the listing. The company is required to meet one of the following criteria: market capitalization of $50 million, net tangible assets of $4 million or net income of at least $750,000. There are also requirements on public float, amount of shareholders and amount of market makers. Small cap is positioned as the best fit for companies in their early stage, but most companies will not get to higher market tiers ever. Minimum bid price for stocks of small cap companies is required to be 4 US Dollars at the start of their NASDAQ Capital Market listing.
- NASDAQ Global Market or mid cap market. It has higher criterias for listing and the total number of companies currently listed is 1,450. The beginning stock bid price should be not lower than 5 US Dollars. In case the price of stock of the company goes below 1 US Dollar afterwards the company will be removed from the NASDAQ Global Market listing.
- NASDAQ Global Select Market, also known as large cap market. This market includes only companies that meet highest standards of the NASDAQ. The listing includes approximately 1,200 best companies. Every company from NASDAQ Global Market has an opportunity to get into large cap NASDAQ market during the review each October. It is the decision of NASDAQ Listings Qualification Department whether to include company into NASDAQ Global Select Market or not.
NASDAQ Index or NASDAQ-100
It is the stock market index composed from the securities of 100 biggest companies, which are listed on NASDAQ and do not operate in the financial market. The index is weighted, meaning that every stock weights according to its’ market capitalization. Even though, the index is based on 100 companies, it includes 107 equity securities, since some of the companies have more that one security, e.g. Google Class A and Google Class C.
NASDAQ-100 is rebalanced once a year and if the company does not meet capitalization requirements it is replaced by the other company that meets requirements. In 2014, the Google Class C stock was added to the index since Google Splitted its’ stocks into Class A and Class C. In the same year, F5 Networks, Maxim Int. P.and Expedia were replaced by Electronic Arts, American Airlines and Lam Research.
In 2015, Equinix was converted to REIT and become part of the financial market, for this reason it was removed from the NASDAQ-100. Walgreens Boots Alliance was included into the index instead of REIT.
NASDAQ has four main financial futures, which are made on the basis of NASDAQ-100 index. Their expiration dates are March, June, September and December of each year. Their tickers are QCN, BIO, ND and NQ all of which are created by the Chicago Mercantile Exchange. These futures are mostly used for hedging or pure speculation due to their credibility.
NASDAQ Trading Hours
Being second biggest stock exchange in the world, NASDAQ offers pre-market trading session as well as market and post market trading session to its’ customers.
Pre-market session starts at 4:00 AM EST (8:00 AM GMT) and ends at 9:30 AM EST (1:30 PM GMT).
Market session begins right after pre-market session and ends at 4:00 PM EST (8:00 PM GMT).
The end of the market trading session gives the beginning of the post-market trading session, which ends at 8:00 PM EST.
NASDAQ has three main levels of access to quotes that can be available to traders.
Is often referred to as an inside quote or real-time quote. Such quote shows only the lowest ask and highest bid and has no information about the values of shares that are offered at the particular price. Such access level allows market makers to hold orders until they can benefit from it, since the trader does not have info about number stocks available at the shown price.
This access level allows to see much more information than Level I. The information shown to trader includes not only bid and ask prices, but also the values of the orders. Furthermore, Level II gives ability to see the names of the market makers who created the orders. Such information is a tool that allows deep pattern analysis of the stock.
It is the most advanced access level available at the NASDAQ. Apart from all features offered by the Level II, this level also offers order execution and ask/bid quotes entry. Level II is used by the registered NASD firms and market makers.
Quotes are important for stocks trading. The analysis of the market and your decisions can be influenced by type of quotes you receive. If you are experienced trader you will definitely want to receive at least Level II quotes. On the other hand, newbie trader with low order volume and no experience will easily get annoyed with too much information from quotes of Level II and III.
NASDAQ MarketSite is a stock market building, which is located at the Times Square in New York. The MarketSite was built in 1999 and started to operate on January 1st, 2000. It has a form of gigantic cylinder with LED displays. NASDAQ MarketSite shows recent market quotes as well as most recent news and ads. The ground floor of this building is occupied by the television studio that operates LED displays on the MarketSite. Displays provide information from the main sources such as Yahoo! Finance, CNN, BBC and other. Also, NASDAQ MarketSite shows weekly syndicated magazine of the BusinessWeek on its’ displays.
The idea of creation of such building was made by Thomas Apple, John Footen, Paul Noble and Andrew Klein. Also, the have patented technologies that are used in the NASDAQ MarketSite. It was renovated a few times due to advance in the technology, especially in displays.
NASDAQ MarketSite is also available for the corporate meetings. Furthermore, it has a real time web cam, which allows to get live stream of the MarketSite tower into your browser.
NASDAQ stock market is owned by the NASDAQ OMX Group. The company is located in the New York and is headed by the Robert Greifield. At this point, NASDAQ OMX owns eight European Stock Exchanges.
NASDAQ had an attempt to purchase London Stock Exchange but was able to buy only 29.4% of shares, so the deal was rejected on February 10th, 2007.
NASDAQ bought Boston Stock Exchange in October 2007 and completed the deal on buying OMX in February 2008. At that time, OMX owned and operated 7 Nordic and Baltic Stock Exchanges. The most recent purchase of the NASDAQ OMX Group is Thomson Reuters for $390 million that was made in June 2013.
For the provision of additional services, the group owns such companies as SMARTS Group, GlobeNewswire, Carpenter Moore, Global Information Services and Directors Desk. Also, NASDAQ includes its’ own stocks in the NASDAQ listings with symbol NDAQ.
NASDAQ vs NASDAQ-100
NASDAQ is often mistakenly mixed with NASDAQ-100. It is important to remember, that NASDAQ is a stock exchange and not an index. This means that NASDAQ alone does not represent any market fluctuations and only allows to buy and sell stocks.
On the other hand, NASDAQ-100 is a futures composite made on the basis of 100 companies. This index takes weighted average of companies that are included in it and represents market states. It is trading instrument, which you can easily find on NASDAQ Stock Exchange.
When comparing NASDAQ to other existing stock exchanges, you should know that it has a few strong pros. First of all, it is second largest stock exchange in the world. So you should feel safe if you trade with it, your orders will be processed.
Secondly, NASDAQ is based in the New York, meaning that it is not some unknown stock exchange that has no reliability. Furthermore, there are three types of market hours, so you will have more than enough time to trade. The main hours are daily hours of the USA, which is additional good point due to high trading volume in this hours.
One more point, is the existence of different levels of quotes, which gives you additional possibilities in your analysis and your trading. This means that if you decide to trade with NASDAQ, you should definitely ask your broker about the level of quotes you will receive.