Nasdaq (Stock Exchange)

Nasdaq is a stock exchange in the United States and one of the two largest in the world by the value of the companies listed on it, alongside the New York Stock Exchange. It began in 1971 as the first fully electronic stock market, matching buyers and sellers through computers rather than on a trading floor. It is known for listing many of the largest technology companies, though its listings now cover every sector.

The name began as an acronym for the National Association of Securities Dealers Automated Quotations. The NASD, the brokers' self-regulatory body, created the system but sold its stake from 2000 and had fully divested by 2006, the year the Securities and Exchange Commission (SEC) registered The Nasdaq Stock Market as a national securities exchange. Older glossaries that describe Nasdaq as "owned by the NASD" are out of date. The exchange is now owned by Nasdaq, Inc., a company whose own shares trade under the ticker symbol NDAQ. The NASD itself merged its regulation arm with that of the NYSE in 2007 to form FINRA.

Older stock exchanges worked like a busy town market: traders stood in one hall and shouted bids at each other. Nasdaq worked more like an online marketplace from the start. Dealers sat at their own desks, posted the prices at which they would buy or sell on a shared computer screen, and anyone connected could see the best prices at once.

Today almost all exchanges trade by computer, so that difference has faded. Nasdaq is now best understood as one of the big shops where company shares are listed and traded, and also as a business that sells the technology to run markets.

Nasdaq started trading on 8 February 1971 as a quotation system for shares traded over the counter, meaning outside exchanges. At first it displayed dealers' prices rather than executing trades; automated execution came later. Its open, screen-based model drew young companies that could not or did not want to list on the NYSE, and many later grew into some of the world's largest firms.

The market's dealer structure was criticised in the 1990s after research suggested dealers were avoiding odd-eighth price quotes, keeping spreads wide; an SEC inquiry and new order-handling rules in 1997 followed. In 2000 the dot-com bubble burst: the Nasdaq Composite index peaked on 10 March 2000 and lost close to 80% by October 2002. Nasdaq then demutualised, became a listed company, and completed its move to exchange status in 2006–2007. In February 2008 it combined with OMX, the Nordic exchange operator, becoming The NASDAQ OMX Group; the company adopted the name Nasdaq, Inc. in 2015. Today it also runs exchanges in Stockholm, Copenhagen, Helsinki, Iceland and the Baltic states.

Nasdaq is an order-driven market today: buy and sell orders from brokers, market makers and trading firms meet in a central electronic order book, and much of the volume comes from algorithmic trading and high-frequency trading. Shares are listed on one of three tiers with different financial and governance standards:

• Nasdaq Global Select Market. The highest tier, for the largest companies.
• Nasdaq Global Market. A middle tier for mid-sized companies.
• Nasdaq Capital Market. The entry tier for smaller companies, often after an initial public offering (IPO).

Listed companies pay listing fees and must meet continuing standards, such as a minimum share price and independent board members; those that fall short can be delisted. Shares listed on Nasdaq can also trade on other US venues, because US market rules link exchanges and require brokers to seek the best available price.

Nasdaq publishes several widely followed indices. The Nasdaq Composite, started in 1971 at a base value of 100, includes almost all shares listed on the exchange and is heavily weighted toward technology. The Nasdaq-100, launched in 1985, covers 100 of the largest non-financial companies listed on Nasdaq and is tracked by some of the most traded exchange-traded funds. Both are weighted by market capitalization, and both differ from the S&P 500 and the Dow Jones Industrial Average, which include companies from several exchanges.

Running exchanges is only part of what Nasdaq, Inc. does. It sells market data, index licences and trading and surveillance technology to other exchanges and banks, and through its 2021 purchase of Verafin it sells software to detect financial crime and market manipulation. Like other exchange operators, it is itself supervised by the SEC as a self-regulatory organisation, with duties to police trading on its markets. In 2013 the SEC fined Nasdaq 10 million dollars over technical failures during Facebook's 2012 IPO, one of several episodes that drew attention to the risks of fully electronic markets. Nasdaq is a core piece of the US capital market and its wider financial market infrastructure.

• Nasdaq