Published Apr 29, 2024 The National Association of Securities Dealers Automated Quotations, better known as NASDAQ, is a global electronic marketplace for buying and selling securities. It was created by the National Association of Securities Dealers (NASD) to enable investors to trade securities on a transparent, fast, and efficient computerized system. NASDAQ is distinguished for being the world’s first electronic stock market, and it is primarily known for its high concentration of technology and internet-related stocks. NASDAQ commenced operations on February 8, 1971. It was the first market to offer electronic trading, thereby revolutionizing the way stocks were bought and sold. Its creation marked a departure from traditional physical trading floors, to a network of computers where trades were executed electronically. This innovation led to increased trading speed and efficiency and helped to reduce the cost of transactions for market participants. NASDAQ has significantly impacted the global stock market, particularly in promoting technology and internet-based companies. It has been instrumental in helping tech giants such as Apple, Microsoft, Amazon, and Google raise capital through initial public offerings (IPOs) and subsequently grow into global behemoths. NASDAQ is often compared to other major stock exchanges such as the New York Stock Exchange (NYSE). One major difference is in their trading platforms: NASDAQ operates entirely through its electronic network, whereas the NYSE combines traditional floor trading with electronic trading. Furthermore, NASDAQ is known for its strong emphasis on technology and innovation stocks, which contrasts with the NYSE’s broader mix of industrial, financial, and other sectors. NASDAQ plays a critical role in the global economy by facilitating the trading and raising of capital for companies. It enables companies to access funding from the public by selling shares, which can be used to finance new projects, pay down debt, or expand operations. This ability to raise capital efficiently contributes to economic growth, innovation, and job creation. Moreover, NASDAQ provides investors with the ability to invest in some of the most innovative and high-growth companies in the world. This offers investors opportunities for significant returns, albeit with potential higher risks, particularly with emerging tech companies. To be listed on NASDAQ, companies must meet specific financial, regulatory, and corporate governance standards. These criteria include financial thresholds concerning assets, earnings, and market capitalization, as well as requirements for the number of publicly traded shares and shareholders. These listing standards ensure that only companies with a solid financial foundation and adherence to good corporate practices are included in the exchange. NASDAQ impacts individual investors by providing them access to trade shares of many leading and emerging technology companies. It also offers a transparent and efficient trading platform, which can result in lower transaction costs and quicker execution of trades compared to other trading venues. Additionally, investors benefit from the wealth of market data and indices that NASDAQ provides, helping them make informed investment decisions. Yes, companies can be delisted from NASDAQ for several reasons, including failing to meet the exchange’s continuing listing standards, which relate to financial condition, corporate governance, and disclosure requirements. A company might also be delisted if it goes through a merger, acquisition, or if it declares bankruptcy. Delisting often negatively affects the company’s ability to raise capital and can lower the stock’s liquidity and investors’ confidence. NASDAQ is fundamental to global finance as it represents a crucial platform for capital formation, enabling technology and innovation-driven companies worldwide to access public markets for funding. It also serves as a barometer of the technology sector’s health and investor sentiment towards innovation-driven industries. By providing a robust, transparent, and efficient marketplace, NASDAQ contributes significantly to the global financial ecosystem’s stability and growth.Definition of the National Association of Securities Dealers Automated Quotations (NASDAQ)
History and Impact
Comparison with Other Exchanges
Significance of NASDAQ to the Economy
Frequently Asked Questions (FAQ)
What are the criteria for a company to be listed on the NASDAQ?
How does NASDAQ impact individual investors?
Can companies be delisted from NASDAQ, and why?
What role does NASDAQ play in global finance?
Economics