Who Started NASDAQ?

The stock market system that traders enjoy today is a direct result of innovations that began with the automated over-the-counter quotes of the early NASDAQ. Today's Nasdaq wall of monitors is a tribute to that early application of computer technology to stock trading, a successful idea that spawned one of the world's largest and most popular exchanges.

History

The National Association of Securities Dealers, NASD, was the self-regulatory agency which oversaw over-the-counter stock transactions, that is, the transfer of shares not listed on one of the U.S.'s major exchanges. On February 5, 1971 trading began with the assistance of the National Association of Securities Dealers Automatic Quotations system, or NASDAQ, the world's first electronic stock market, though at the time it was simply a publication of bid and offer spreads. Nasdaq eventually shifted from an acronym to a proper noun in its own right, as it revolutionized trading and made markets more accessible to the public. In 2000 the NASD divested itself of the exchange, and, in 2007, merged with the regulatory arm of the New York Stock Exchange to form FINRA, the Financial Industry Regulatory Authority.

Identification

The president of the NASD at the time the NASDAQ was founded was Gordon S. Macklin, a prominent figure in the securities field at the time. Macklin shepherded the computerized information system that allowed trading to occur between parties a world apart, connected only by technology, and under him the Nasdaq became the third-largest stock market in the world. Macklin was a board member of WorldCom when scandalous accounting irregularities precipitated the company's bankruptcy. At the age of 78, Macklin died in early 2007, leaving the Nasdaq as his principal legacy.

Significance

Stock exchanges began long before the age of computers and the Internet. The American Stock Exchange literally began as a collection of traders and brokers meeting on a curb in Manhattan. Before the NASDAQ, trades could only occur between authorized pit traders face-to-face in the same room, with orders phoned in. Not only did the Nasdaq eventually revolutionize access to the market through communications technology, it's original automated bid and offer quotations boosted the efficiency, transparency, and liquidity of over-the-counter issues.

Effects

Because of the success of NASDAQ's pioneering technology, the exchange became the fashionable palace for other tech-related startups to list their shares. Over time, it became more than simply an electronic bulletin board of quotes, but a proper exchange by adding trade and volume data and automated trading. The Nasdaq was the center stage of the late nineties tech boom. The bursting of the tech bubble took some of the shine off the Nasdaq, but it continues to be a tech-laden exchange.

Size

Roughly 3,200 securities are listed on the Nasdaq, representing 35 different countries and all sectors of industry. The company which owns the exchange, NasdaqOMX, has contracted to list it's securities on the Tel Aviv Stock Exchange, another center of communications technology. Having begun as the market for the most illiquid and hard to trade stocks, today companies listed on the Nasdaq must be registered with the SEC, maintain at least $10 million in shareholder equity, and meet a variety of other requirements for assets, capital, public shares, and shareholders.