It’s a platform for people to buy and sell securities electronically.
These securities are mostly in the form of shares.
What Does Nasdaq Stand For?
NASDAQ stands for National Association of Securities Dealers Automated Quotations.
When it was first introduced in 1971, the purpose of the NASDAQ was to make stock trading faster and more accessible by using a computerized system.
For younger companies (often startup technology companies), listing on the NASDAQ was a way to raise capital and grow more quickly than they would on the New York Stock Exchange.
Why Another Stock Market?
The NASDAQ promotes this growth by driving competition in the stock market.
The Components of the NASDAQ
The NASDAQ has two components: it’s a trading platform and an index.
The first component of the NASDAQ, the trading platform, uses a matching system to match the desired prices of buyers and sellers to make trades.
For example, if there is a buyer willing to buy 50 shares of Apple at $295 per share and a seller that is willing to sell for that price, the NASDAQ matching engine executes the trade.
The purpose of the NASDAQ Composite is to represent the overall performance of the exchange.
The NASDAQ uses many different types of securities in its calculation, including all the NASDAQ-listed stocks, the majority of which are in the technology industry.
In general the NASDAQ is perceived as the go-to-market for technology companies, being the home of Apple, Facebook, and Amazon.
Alternatives to NASDAQ
The NASDAQ and the New York Stock Exchange accommodate a majority of all equities trading in North America.
Until NASDAQ came onto the scene, traders had to go to the New York Stock Exchange’s trading floor on Wall Street in order to buy and sell.
While the New York Stock Exchange relies on face-to-face interactions between traders in an auction-style format, the NASDAQ lets buyers and sellers worldwide trade through a broker.
Contact an Advisor
If you’re interested in investing your money on this market, contact a a financial advisor in Portland, ME. We’ll be happy to provide more information about how it works as well as tips for choosing investments wisely so you can get started with confidence today. If you don’t live locally, our financial advisor page will route you to the full list of areas we service.
What Is the NASDAQ FAQs
About the Author
True Tamplin, BSc, CEPF®
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True contributes to his own finance dictionary, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.