Nasdaq Stock Exchange - features of work, conditions and reviews

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Anyone who has ever heard financial reports on the news, or who has personally traded stocks, knows that there are places called stock exchanges. One of the most famous of them is the NASDAQ. Here people buy and sell their shares in the capital of companies registered on it.

However, few people think about how exactly the stock exchange works. Highly secure computer systems are used to exchange securities between buyers and sellers. It also sets the opening and closing prices. This article has attempted to provide an overview of the various services and methods by which these transactions are carried out on the NASDAQ stock market.

Where do stocks come from? They belong to companies listed on the Nasdaq exchange. If a joint-stock company wants to become public, it chooses a trading platform where it will sell its shares. Several thousand companies have chosen NASDAQ.

What is this?

NASDAQ ("Nasdaq") is a stock exchange that allows investors to buy and sell shares withusing an automatic, transparent and fast computer network. The acronym that makes up its name originally stood for the National Association of Stock Dealers Automatic Quotation, created in 1971. The NASD offered an alternative to its own cash transaction system that burdened investors with inefficient trading and delays.

Composition

NASDAQ currently has approximately 3,200 publicly traded companies and is the second largest stock exchange (by volume of securities) and the largest electronic stock market. It trades stocks of various types of businesses, including those in manufacturing, consumer durables and non-durables, energy, finance, he althcare, technology, transportation and utilities. But most of all, the exchange is known for its high-tech stocks.

To be listed on the NASDAQ, companies must meet specific financial criteria. They are required to maintain a share price of at least $1, and their outstanding volume must be at least $1.1 million. For smaller companies unable to meet these financial requirements, there is the NASDAQ Small Caps. The stock exchange transfers participants from one market to another in accordance with changes in their status.

Trading

The NASDAQ Electronic Stock Exchange does not offer any real tradingsites. It is a dealer market, so brokers buy and sell shares through a market maker rather than directly from each other. A market maker owns and operates a certain stock of securities held in its exchange accounts. When a broker wishes to purchase shares, they do so directly from the market maker.

When the NASDAQ was just starting out, trading was done via bulletin boards and over the phone. Today, buying and selling on the stock exchange is done using automated trading systems that offer full trading and daily trading volume reports. Automated trading also offers automatic execution of trades based on parameters set by the trader.

Trading volume

The Nasdaq exchange fee is significantly lower than other stock markets. The maximum commission is 150 thousand US dollars. This low cost allows many new, fast growing and volatile stocks to be traded.

Although the New York Stock Exchange is still considered to be the bigger market because of its much larger market capitalization, the NASDAQ's trading volume is higher than any other US exchange, at about 1.8 billion trades per day.

Information display

With no physical trading floor, Nasdaq has built a MarketSite in Manhattan's Times Square to create a tangible presence. The large external electronic display on the tower provides current information 24 hours a day.financial information. NASDAQ Stock Exchange hours are Monday through Friday, 9:30 am to 4:00 pm ET, excluding major holidays.

Indices

Like any stock exchange, Nasdaq uses an index or set of stocks that are used to create a snapshot of the market. The NYSE offers the Dow Jones Industrial Average (DJIA) as the main index, while the NASDAQ offers the NASDAQ Composite and NASDAQ 100.

If the composite index reflects the change in the value of more than 3000 traded shares, then the DJIA reflects the peaks and falls of the 30 largest companies. The first of these is often simply referred to by the name of the exchange and is most often quoted by financial journalists and reporters.

The NASDAQ 100 is a capitalization-weighted modified index of the top 100 companies listed on the NASDAQ. They cover a range of market sectors, although the largest ones tend to be technology-related. Each year, companies can be included or removed from the NASDAQ 100 based on their value.

Both indices include both US and non-US businesses. This distinguishes them from other major indexes as the DJIA does not include foreign companies.

NASDAQ History

Founded by the National Association of Securities Dealers, the NASDAQ Exchange opened on February 8, 1971. The world's first electronic stock market began with over 2,500 non-interest bearing securities. At thatAt the time, the NASDAQ was an electronic newsletter. At first, there was no real trading between buyers and sellers. Instead, the exchange leveled the chances of traders by narrowing the spread between the offer and ask price of shares.

Due to its high-tech nature, the NASDAQ Composite was hit hard by the dot-com bubble in the late 1990s, dropping from over 5,000 to under 1,200 points. Other important dates in the history of the exchange are as follows:

• 1975 - NASDAQ invents the modern IPO (initial public offering), listing venture capital backed companies and allowing underwriting syndicates to trade as market makers.
• 1985 - The NASDAQ-100 was created.
• 1996 – First website www.nasdaq.com launched.
• 1998 - NASDAQ merged with the American Stock Exchange to form the NASDAQ-AMEX market group. AMEX was acquired by NYSE Euronext in 2008 and its data has been integrated into the NYSE.
• 2000 - Exchange members voted for its restructuring and transformation into an open joint stock company NASDAQ Stock Market, Inc.
• 2007 - the year of acquisition of the Swedish financial company OMX and change of name to NASDAQ OMX Group. At the same time, the Boston Stock Exchange was bought.
• 2008 Acquisition of the oldest Philadelphia Stock Exchange in the US.
• 2009 marks the launch of the industry's first mobile web site, nasdaq.com.

Main Services

In general, for workstock exchange requires 3 separate components:

• interface is what allows brokers and market makers to access the trading system;
• search for counter orders - a computer system that links buyers and sellers when their prices match;
• quote services - providing data on quotes for buying and selling shares.

Of course, there are many other services provided within the exchange, including MarketSite broadcast, record keeping and backup. But the three services described above are the most important. They should be discussed in more detail.

Secrets of the American Stock Exchange NASDAQ

Of the three main exchange services, the simplest is the quote service. Stock prices fluctuate daily and every second. And people all over the world want to follow them in real time. Brokers want to provide quotes to their clients, and news companies want to show them during their programs. To meet this need, Nasdaq collects data on the most recent prices posted on the exchange's computer system, which allows you to see what is happening inside the counterbid search engine, and then sends this information around the world.

Buyers and sellers transact electronically with their brokers. Data from hundreds of computers (one for each broker) is fed into the NASDAQ system. Then the transactions are processed by the program for searching for counter orders,which on the Nasdaq exchange is made in the form of one highly reliable computer. This is where the real trading happens.

Work example

The easiest way to imagine how the NASDAQ works is to consider the following example. Suppose ABC is registered on it. The retrieval system stores all unsatisfied bids relating to it. Let's say 3 clients want to sell their shares. They place their orders in which they indicate how many shares and at what price they want to sell them:

• Client 1: Selling 50 shares at $15.40.
• Client 2: Selling 200 shares at $15.25.
• Client 3: Selling 100 shares at $15.20.

Suppose another 4 people want to buy equity in ABC. They place their orders with the number and price of shares.

• Client A: I will buy 100 shares at $15.15.
• Customer B: I will buy 200 shares at $15.10.
• Customer B: I will buy 150 shares at $15.00.
• Client D: Buy 75 shares at $14.95.

No match right now. The lowest sell side price is $15.20 and the highest buy side offer is $15.15. The difference between the minimum selling price and the maximum buying price is called the spread. As a rule, for popular stocks it is 1-2 cents. When securities are traded in small volumes, the value of the spread can be much larger. Due to price differences, these bids will be active until they arewill be satisfied.

Suppose customer A registers a new offer. He wants to buy 50 shares for $15.25. Instead, he will receive customer 3 securities at $15.20 because that is the lowest price available on the list of sellers. The 100 shares that sell for $15.20 will be split - 50 will remain listed and the remaining 50 will close the transaction. Customer 3 is happy because he got the price he wanted, and customer A is happy because he got a small discount.

In closing

The counter-bid search engine does this for thousands of listed shares on the NASDAQ stock exchange, and millions of transactions are processed every day. Once a suitable offer is found, information about the completed transaction from the search engine will be returned to the buyer's and seller's brokers. The data is also sent to the quote servers so that anyone interested can see what happened.

Of course, this is a very simplified explanation. In fact, due to the sheer number of people involved in trading, thousands of computers and brokers are required to keep the system running, making processes very complex very quickly.