NASDAQ

Definition

NASDAQ is a major stock exchange in the United States, known for its focus on technology and innovation. It serves as a marketplace for trading securities, providing a platform for companies to offer their shares to the public and for investors to buy and sell these shares.

5 Must Know Facts For Your Next Test

1. NASDAQ was founded in 1971 and is the second-largest stock exchange in the world by market capitalization, behind only the New York Stock Exchange (NYSE).
2. NASDAQ is known for its focus on technology, innovation, and growth companies, with many of the world's largest tech companies, such as Apple, Microsoft, and Amazon, listed on the exchange.
3. Unlike the NYSE, which uses a physical trading floor, NASDAQ operates as a fully electronic, computer-based market, allowing for faster and more efficient trading.
4. NASDAQ is home to several major stock indexes, including the NASDAQ Composite, which tracks the performance of over 3,000 stocks listed on the exchange.
5. The NASDAQ Listing Requirements are generally less stringent than those of the NYSE, making it easier for smaller and younger companies to list their shares on the exchange.

Review Questions

• Explain how the structure and operations of NASDAQ differ from traditional stock exchanges like the NYSE.
  • NASDAQ is a fully electronic, computer-based stock exchange, in contrast to the physical trading floor of the NYSE. This allows for faster and more efficient trading on NASDAQ, as orders are matched electronically rather than through human brokers. Additionally, NASDAQ's listing requirements are generally less stringent than the NYSE, making it more accessible for smaller and younger companies to list their shares on the exchange. These structural differences contribute to NASDAQ's focus on technology, innovation, and growth companies, which are often attracted to the exchange's electronic platform and more flexible listing standards.
• Analyze the role of NASDAQ in the broader context of the US financial markets, particularly in relation to the board of directors' responsibilities.
  • As a major stock exchange, NASDAQ plays a crucial role in the US financial markets by providing a platform for companies to raise capital and for investors to trade securities. The board of directors of companies listed on NASDAQ have a fiduciary duty to act in the best interests of their shareholders, which includes making decisions that impact the company's performance and valuation on the exchange. The board's oversight and strategic guidance can directly influence a company's ability to list on NASDAQ, maintain its listing requirements, and effectively navigate the exchange's trading environment. Additionally, the board's role in corporate governance and risk management can have implications for a company's reputation and investor confidence on the NASDAQ exchange.
• Evaluate the significance of NASDAQ's role in the overall landscape of the US financial markets, considering its impact on the investment opportunities and financial decisions of individual and institutional investors.
  • NASDAQ's prominence as a leading stock exchange in the US financial markets has far-reaching implications for investors. As a hub for technology, innovation, and growth companies, NASDAQ offers investors unique investment opportunities that may not be as readily available on other exchanges. The exchange's electronic trading platform and more flexible listing requirements can attract a diverse range of companies, providing investors with a wider array of investment options and the potential for higher returns. However, the focus on riskier, high-growth sectors on NASDAQ may also expose investors to greater volatility and risk. The board of directors of NASDAQ-listed companies play a crucial role in managing these risks and maintaining investor confidence, as their decisions can directly impact the performance and valuation of the stocks traded on the exchange. Ultimately, NASDAQ's significance in the US financial markets stems from its ability to facilitate capital formation, foster innovation, and shape the investment landscape for both individual and institutional investors.

Related terms

Stock Exchange: A stock exchange is a centralized marketplace where stocks and other securities are bought and sold by investors.

Over-the-Counter (OTC) Market: The OTC market is a decentralized market where securities are traded directly between parties, without the oversight of a centralized exchange.

Electronic Communication Network (ECN): An ECN is an electronic system that matches buy and sell orders for securities, allowing traders to bypass traditional stock exchanges.