Nasdaq: history and its evolution

NASDAQ (National Association of Securities Dealers Automated Quotation) US electronic stock market, created in 1971 by the National Association of Securities with the aim of facilitating the trading of securities that take place outside the official stock exchanges.

The NASDAQ was the first stock exchange in the world to adopt, in 1987, a system for disseminating quotations and transmitting orders on an exclusively electronic basis. It is characterized by being a market with intermediaries, in which brokers buy and sell securities on behalf of their clients through market makers, operators specialized in particular securities, who are required to constantly supply the quotation of the asking price (bid or bid) and offer (ask or ask) of the security (? bid-ask, range). The large number of market makers who act in strong competition with each other and the electronic trading system, which guarantees high transparency and efficiency, contribute to making the NASDAQ a particularly liquid market. There are over 3,200 companies listed on the NASDAQ, most of which operate in technological sectors with a high rate of innovation (biotechnology, computer hardware and software, telecommunications, media).

The frequency of admission of new securities (generally relating to companies with strong growth potential, but at the same time highly volatile) is higher due to lower entry fees than those required to access other regulated markets. The reference index is the NASDAQ Composite, a basket made up of more than 3,000 stocks of companies, including non-US companies, listed exclusively on the NASDAQ, with the exception of stocks of companies listed before 2004 on other stock exchanges, for which it is double negotiation. Particularly important is also the NASDAQ 100, an index made up of the securities of the 100 most capitalized US and foreign non-financial companies listed on the NASDAQ. Other indices are the NASDAQ Bank, the NASDAQ Biotechnology and the NASDAQ Transportation index.

What is the Nasdaq?

What are its origins and what was its evolution? Here's everything you need to know

When we talk about financial markets, stock exchanges and investments, we often hear about the Nasdaq when dealing with Wall Street. However, few know its origins and evolution. Here's everything you need to know.

Nasdaq: what it is, origins and history

NASDAQ is the acronym for National Association of Securities Dealers Automated Quotation. This market was established on February 8, 1971 and was the first exclusively electronic stock exchange in the world. Originally the computers were only used to disseminate price information on a continuous basis and not to connect operators.

Until 1987, the passage of orders was done by telephone. However, the dissemination of quotations electronically guaranteed a significant increase in market transparency and efficiency. The Nasdaq has long been the stock exchange where spreads were tightest.

At the end of 1987, the entirely electronic transmission of orders was also established. During the market crash that occurred in October of that year, the unsustainability of order taking by telephone became evident, since traders and dealers could not physically handle the various calls for orders.

The Nasdaq is a privately owned stock market. It belongs to Nasdaq Inc., a company listed on the same exchange. Today it is regarded as the "Tech Exchange" for the vast majority of technology companies that are listed on it. However, often when we hear about this term we refer to the Nasdaq-100 or the Nasdaq Composite, which are instead the two stock market indices referred to in this list.

Originally the Nasdaq was to be the first stock exchange in the world to operate on the basis of electronic trading. Indeed that was the case, but as we all know by now every single stock exchange in the world works this way now.

Over time, the company's mission has changed, while maintaining unique aspects compared to the New York Stock Exchange (NYSE) and other exchanges. Even though it is an exchange that belongs to a private company, the exchanges are regulated by the Securities and Exchange Commission (SEC). The SEC is the US authority that regulates and verifies the implementation of financial market laws, in order to guarantee the necessary transparency for investors.

Nasdaq and NYSE: What's the difference?

What is the difference between Nasdaq and NYSE? This is the most frequent doubt that concerns Italian investors when they think about the US stock exchanges. Meanwhile, it is important to highlight that the Nasdaq is certainly based in New York, but not on Wall Street. The office is in Manhattan, but in the famous square of Times Square.

And having always been an electronic market, it has not experienced that phase in which the stock exchanges were based on going in person to negotiate the securities. Furthermore, on the New York Stock Exchange (NYSE), each security has its own market maker who is responsible for bringing together supply and demand for each financial instrument. The Nasdaq is based on a dealing system, where each stock has at least two different market makers competing to offer the best execution conditions.

The NYSE uses an auction system in which market participants can buy and sell financial instruments from each other. On the Nasdaq, on the other hand, all orders go through market makers who make sure they keep sufficient deposits of securities to always be able to execute the orders themselves.

The NYSE is perceived as an exchange for companies in traditional, already established sectors, with lower growth rates and lower risks. The Nasdaq is perceived as an exchange for emerging companies, with high growth rates and more volatile stocks.

The Nasdaq Indices: Nasdaq 100 and Nasdaq Composite

Like any stock exchange, and even more so since it is the second largest in the world, the Nasdaq also has its indices. Very often these indices are used as a reference to analyze the trend of tech shares, which are evidently the most present on the Nasdaq. In detail, the main indices are:

Nasdaq Composite: This index is made up of all companies listed on the Nasdaq market. The shares of more than 3,000 companies are traded on this exchange. These can be shares of financial, investment and technology companies in general. What is Nasdaq 100? The Nasdaq 100 index was created on January 31, 1985 and consists of the 100 largest-cap technology companies listed on the Nasdaq Composite (there are actually more, as some companies that are part of it issue two classes of shares ). Does not include financial companies.

Nasdaq Biotechnology: Consists of pharmaceutical and biotechnology companies that are listed on the Nasdaq (and must be listed on that market only), plus other requirements