The History of NASDAQ
NASDAQ, a computerized system that provides brokers with price quotes, is one of the prevailing stock exchanges in the world. Created by a government mandate, the National Association of Securities Dealers Automated Quotation System has risen to a global giant, through innovation and niche pricing.
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Purpose
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NASDAQ was created in response to concerns from Congress in the 1960s that the Securities and Exchange Commission had been lax in supervising stock trades, and had not adequately enforced rules against large securities companies. A 1963 SEC report found that the American Stock Exchange "had failed in creating an adequate structure of surveillance, control and discipline," and it questioned the effectiveness of self-regulation and the ability of exchanges to protect investors. The SEC's solution was automation. It assigned this task of creating a computerized system to the National Association of Securities Dealers.
Origins
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Because of the amount of planning involved, the development of the system did not begin until 1968. On February 8, 1971, NASDAQ officially opened, quoting more than 2,500 over-the-counter securities. While NASDAQ did not officially change its name to "The NASDAQ Stock Market" until 1990, it had developed many manifestations of itself. The NASDAQ National Market, a collection of company listings held to higher standards than other listed stocks, was created in 1982. In 1984, NASDAQ launched a system to execute small orders automatically, called the Small Order Execution System. NASDAQ created the OTC Bulletin Board in 1990 to provide information to investors on stocks not included in NASDAQ.
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How It Works
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NASDAQ is unique among stock exchanges because it has no actual selling floor. While it maintains the NASDAQ MarketSite in New York's Time Square, all trades are virtual.
Why Companies Choose It
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Perhaps the most significant reason that companies choose NASDAQ is that the listing fees are substantially less than those for other stock exchanges. This characteristic alone contributes greatly to NASDAQ's reputation for listing many high-tech stocks. Most high-tech companies experience high growth and some level of volatility. With its lower listing fees, NASDAQ can cater to such companies.
Another advantage of NASDAQ is that it provides many other services to the companies that it lists, including market intelligence, compliance, communications and visibility. NASDAQ also has several different markets for companies to be listed in, include the NASDAQ Small Caps Market, Global Market and Capital Market. NASDAQ also tends to have lower execution costs and tighter price spreads compared with other exchanges.
NASDAQ Today
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NASDAQ lists more than 3,200 companies, including Apple, Yahoo!, Dell and many of the world's other top technology companies. The system lists firms from many other business sectors, including financial services, retail, communications, transportation and biotechnology. NASDAQ has more than 1.8 million trades daily. The system can process 1 billion messages daily and boasts a response time of less than a millisecond per transaction, cancellation or order acknowledgment.
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