Nasdaq Stock Exchange

Nasdaq Stock Exchange

Nasdaq Stock Exchange

The Nasdaq stock exchange, located in Times Square in New York City, is a market for trading stocks based in the United States. The Nasdaq is the second largest stock exchange in the world based upon market capitalization, with its market capitalization (nearly $11 trillion as of 2019) at about half that of the world leading New York Stock Exchange, which has a world-leading $23 trillion market capitalization.

The NASDAQ was founded in 1971 by the National Association of Securities Dealers (NASD), with its name originally being an acronym for National Association of Securities Dealers Automated Quotations. In its initial form, the NASDAQ was much simpler than it is now. It was formed to provide stock quotes, but didn’t have an associated mechanism for executing trades. Instead, quotes from the first version of the NASDAQ were used to inform traders, who executed trades through stock brokers.

Later, in 1998, the Nasdaq became much more accessible to traders by opening up online trading opportunities. Shortly thereafter traditional stock trading brokerages began offering online trades with lower commissions, and trading companies began to form around the opportunity. Today, there are many online trading brokerages, including eTrade, TD Ameritrade, and dozens of others, that offer zero commission trades.

The Nasdaq was separate into its own entity by its founders, the NASD, in 2000. In 2002, Nasdaq, Inc. went public through an IPO. Nasdaq, Inc. makes money by charging companies to be listed on their exchange, charging fees for transactions that take place on their exchange servers, and providing consulting and other services related to listing companies on a public stock exchange, including the Nasdaq itself.

How to Buy and Sell Nasdaq Stocks

Nasdaq stocks can be bought and sold by opening an account with one of the many online brokers that trade Nasdaq stocks, including:

  • eTrade
  • Fidelity
  • Scottrade
  • TD Ameritrade

Nasdaq publishes a list of what it considers to be the best online brokers. Before you decide which broker to use, you might consider reading their evaluations and specific recommendations.

Getting Listed on the Nasdaq

To be listed on the Nasdaq (which makes a company’s shares available for buying and selling by the public) a company must meet certain criteria. The listing process is documented in Nasdaq’s Initial Listing Guide. The listing requirements relate to companies’ financials, liquidity, and corporate governance.

A company can be listed in one of three different market tiers by Nasdaq:

  • The Nasdaq Global Select Market®
  • The Nasdaq Global Market®
  • The Nasdaq Capital Market

The requirements for the Nasdaq Global Market tier are listed below as a reference.

Nasdaq Global Market Listing Requirments

Nasdaq Indices

There are several indices published by the Nasdaq that are used to evaluate the performance of a market sector as part of the United States and global economies. Nasdaq’s listings are waited towards technology companies, which makes the major Nasdaq indices

Nasdaq Composite Index

The Nasdaq Composite Index is what is typically being referred to when people talk about whether the Nasdaq is “up” or “down”. This index is a statistical gauge of the market in general, but is weighted toward technology-related companies. Most of this index’s movement comes from the increase or decrease in value of stocks that make up the Nasdaq-100 index.

Nasdaq-100 Index

The Nasdaq-100 is a stock index that includes the largest companies on the Nasdaq, excluding companies that are categorized as in the financial sector.  Companies included on the Nasdaq-100 index include:

  • Google’s parent company Alphabet
  • Amazon
  • Adobe
  • American Airlines
  • Apple
  • Autodesk
  • Cisco
  • Costco
  • eBay

…and lots of other recognizable names in the technology, shopping, and other market segments. The full list of the 100 companies included in the Nasdaq-100 index is available on the Nasdaq website.