Explain the NASDAQ Stock Market
The NASDAQ and the New York Stock Exchange (NYSE)are the two major stock exchanges in the United States. Stock exchanges promote the orderly buying and selling of shares of stock. NASDAQ is the much younger exchange and significantly changed how stock trading works in the U.S.
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History of NASDAQ
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The NASDAQ stock exchange opened for business in February 1971. At that time the NASDAQ became the first stock market where all stock trades were entered and completed electronically. Until the start of the NASDAQ, all stock exchanges used an open outcry system where stock orders were completed on a trading floor between brokerage firm representatives and the stock market specialists. The NASDAQ became the home listing exchange for up and coming technology stocks. For many years, the NASDAQ was considered the exchange where companies could get started as publicly-traded stocks and then move to the NYSE when they were larger and more established.
How NASDAQ Works
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The NASDAQ system uses a computer network to match buy and sell orders of the NASDAQ listed stocks. Member companies of the exchange called market makers ensure there will be a buyer or seller for any stock order. A market maker is responsible for a stock by being always available to buy shares at the current bid price or sell at the current ask price. The majority of NASDAQ listed share trades are completed electronically and the market maker never gets involved.
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NASDAQ Listed Stocks
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As of March 2011, over 2,800 companies had their stocks listed on the NASDAQ stock exchange. NASDAQ is known as the stock exchange for technology stocks and the two largest companies listed on the exchange are Apple and Microsoft. These two stocks each have a market capitalization over $200 billion. Google, Intel and Amazon.com are also prominent listings on the exchange. NASDAQ stocks can also be companies as small as Community Central Bankcorp with a market value of less than $1 million.
NASDAQ Stock Indexes
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The NASDAQ stock market is tracked by two stock indexes. The NASDAQ Composite tracks the value of all listed common stocks on the exchange. The NASDAQ 100 index tracks the stock prices of the larges 100 stocks including the companies listed above. The NASDAQ 100 is followed as an indicator for the technology stock market sector. Traders can trade the NASDAQ 100 through listed futures contracts and exchange traded funds (ETFs).
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