What is the NASDAQ stock exchange?
NASDAQ stands for National Association of Securities Dealers Automated Quotations. It was founded in 1971 by NASD, renamed Financial Industry Regulatory Authority (FINRA). The NASDAQ stock exchange was initially into automated quotations and was the first electronic stock market service in the world.
With time the market of NASDAQ grew, and it became one of the most traded stock exchanges. With its over-the-counter trading system, the majority of trades were executed through the stock exchange. At present, there are many stock exchanges that provide the services of over-the-counter trading.
NASDAQ became an enormous name in the US market with an increase in the percentage of the trade in the stock market. With the development and accessibility of the stock exchange in 1992, it joined the London stock exchange. Thus, it was the first intercontinental linkage of two stock exchanges with capital markets.
The stock exchange was so popular that it used the slogan, “the stock market for the next hundred years” in 1998. This is because the stock exchange attracted several companies to invest in the stock market.
NASDAQ‘s main indices are the NASDAQ Composite, which has been present since the inception of the stock exchange. However, there are several indices that NASDAQ has introduced in the past years of trade.
The stock exchange operates as per the Eastern Time Zone and works on the regulations of FINRA. With a total market capitalisation of $32.09 billion, the market is the second-highest of the US trade market.
How does the NASDAQ stock exchange work?
The first thing to know about the working of the stock exchange is that the stocks that are traded on the exchange where do they come from? So, the shares of the companies that are listed with the stock exchange offer their stocks to be traded in the market. The companies choose stock exchanges like NASDAQ to trade their shares when they want their shares to be public, open for all traders.
NASDAQ has more than a thousand companies listed on it that trade daily in various stocks.
The stock exchanges have three main components that help to work, these are:
- Interface: It is a place of trade where the brokers, dealers and market makers get access to the system.
- Matching Engine: It is a computer system that connects the buyers and sellers whose prices match.
- Quote Services: It is the buy and sells quote price that NASDAQ offers for data feeding.
However, NASDAQ offers various services to its clients like recording, security, broadcasting, news and backup services etc.
The prices of stocks in the market keep fluctuating frequently, and traders in the market want stable prices to trade easily. Therefore, brokers offer quote prices to the clients, and the news organisations display the quotes on social platforms to reach the public. So, to meet the needs of the brokers and general traders, NASDAQ provides quoted prices of the stocks through computers.
The computer system is able to analyse the prices by checking inside the matching engine and then publicising the data for their use.
Traders of the NASDAQ stock exchange are there in every corner of the world, and they use different devices to trade. So, the system of NASDAQ has data of all the traders globally, which helps them to analyse the quoted price of the stocks.
The matching engine of the NASDAQ is the actual place of the trade, where most of the decisions are made using computers.
The companies listed on the stock exchanges match the data. We can understand this by an example: there are 2 traders who want to purchase shares of a company named XYZ, and there are 3 traders who want to sell their shares of the same company. So like this, the NASDAQ matches the stocks of a company and their requirements.
Also, with the bid and ask price of the stocks, traders can find the spread available for the stocks. Traders, through the matching engine, have all the required information and news of the stock market. Dealing with millions of stocks every day, the matching engine is the most efficient tool of the NASDAQ stock exchange.
NASDAQ Trading Advantages
The NASDAQ stock exchange is a significant part of the stock market, which works to smooth the functioning of the trade. There are many companies that are listed with the NASDAQ stock exchange to benefit from the advantages of the stock exchange. Here we have discussed why trading with the NASDAQ stock exchange is profitable.
NASDAQ is a regulated stock exchange that works on set rules and regulations of the organisation. The operation under an organisation with set guidelines makes the exchange most secure and safe for stock trading.
The stock exchange trades in public, so it is open for trade for all. The companies listed with the NASDAQ stock exchange have their shares listed in public which all could trade. Thus, more transparency of trade.
The stock exchanges have genuine and registered companies listed on their stock exchange with proper documentation and verification. Thus, making it a trustworthy trading option for investors of the stock market.
Traders of the stock exchange have listed companies, with most of them offering dividends to their shareholders. So, traders can enjoy the benefit of dividends from the companies invested with the ownership.
The trade is completely online, which saves traders time, money and extra expenses. Moreover, traders have control over the process of trade; they can check the market whenever they want, monitor, regularly invest and many more.
Investors of the stock exchange get updates and news over the happenings around the world. As a result, traders have all the information sitting at home, and they can accordingly make decisions about their investments.
Stock exchanges are a valuable part of the trade that help companies be regulated and perform with security. Traders invest in listed companies, have the security of trade, dividends, online trade, updates and news and whatnot with NASDAQ.
NASDAQ is not only a stock exchange; it is the second-largest stock exchange; with name and market capitalisation, it has more facilities than any other stock exchange. Traders should always invest in such stock exchanges for profitable returns and less fraud. It could be accessed through brokers such as TradeATF or any other broker. But, traders have to check first if the broker has the facility of NASDAQ stock exchange trading.