“We aim to set the pace for rethinking capital markets and economies anywhere and everywhere.”
Adena T. Friedman, President and Chief Executive Officer of Nasdaq, shares the vision of the American stock exchange.
With reference to the market capitalization of shares traded, Nasdaq is ranked second on the list of stock exchanges, following the New York Stock Exchange (NYSE). Yet Nasdaq differs from other exchanges by serving as an electronic global marketplace, providing an online place to buy and trade securities.
Currently, Nasdaq has the greatest trading volume of all stock exchanges in the United States. Nasdaq manages approximately 1.8 billion trades per day from their listing of more than 3,000 companies, and it’s all done electronically through market makers.
Nasdaq in Relation to Other Stock Exchanges
Nasdaq is both a representation of an index of stocks (Nasdaq Composite) as well as the Nasdaq stock exchange which lists these stocks for exchange. It offers up-to-minute quotes and news for global indices and world markets.
Unlike the NYSE, which retains a physical trading floor on Wall Street, Nasdaq doesn’t have a brick and mortar location for trade. Instead, trading takes place directly between investors and market makers (and includes technology giants such as Apple and Meta).
Investors connect to a centralized exchange infrastructure to trade and use their own accounts to buy and sell stock. Market makers offer a bid and ask price for a security. These marketing-making firms raise the liquidity for stocks listed on Nasdaq.
Known for technology and innovation, Nasdaq lists companies that operate within the internet, biotechnology and other novel industries that are positioned for rapid growth (and therefore more risk-prone).
The Nasdaq stock market has three main tiers, each with its own specifications, namely;
- Nasdaq Global Select Market
- Nasdaq Global Market
- Nasdaq Capital Market
By shifting the focus to top companies outside of the financial sector, Nasdaq plays a large role in defining economic indicators on a local and global scale. The lower entry requirements create a growth opportunity for companies with less capital.
The Crux of the Nasdaq Market
As a dealer’s market, traders use a dealer to buy and sell instead of exchanging directly with one another. The exchange differs from an auction market which is synonymous with the NYSE.
Nasdaq equity indexes are known to be innovative and track groundbreaking segments of the global economy. Flagship equity indexes worth noting include the following;
- Nasdaq Composite Index which covers more than 2,500 stocks
- Nasdaq-100 (NDX) which contains 100 of the largest non-financial securities (both local and international) including big companies such as Apple, Google, and Starbucks
- OMX Stockholm 30 Index (OMXS30) which includes the top 30 stocks that are actively traded on the Stockholm Stock Exchange
- PHLX Semiconductor (SOZ) includes companies that are primarily involved in design, distribution, manufacture, and semiconductors
- Nasdaq Global Equity Index (NQGI) is a float-adjusted market capitalization-weighted index that tracks global equities (covering more than 98% of the entire listed market capitalization)
By shining the light on tech-heavy businesses and innovative companies, stock prices on the Nasdaq market can be volatile. With multiple market makers handling stock, the rise and fall of stock prices can be quite dramatic.
In the same breath, the all-electronic trading method is considered advantageous by many traders. The lower listing fees and lower minimum requirements to qualify for a listing also appeals to companies.
Note: Please do not invest money or assets in the financial markets that you cannot afford to lose. This article should not be construed to be investment advice and is for information purposes only