Nasdaq – What is it ?
NASDAQ was founded on February 7, 1971 in New York and is currently the second largest securities exchange market in the world. What’s unique about NASDAQ is that it was the first all-electronic stock market. When it was first founded though, it did not allow brokers to actually execute trades, and was simply a system to quote bid and ask prices. Now NASDAQ executes the majority of trades that had once been referred to as Over the Counter trades.
Initially brokers were not fans of NASDAQ because it lowered the spread. Brokers, at the time were making a lot of money on the spread, and NASDAQ was cutting into their profits. When brokers talk about the spread they mean the difference between the bid price and the ask price of a stock. How brokers make money on the spread is complicated, but suffice to say the lower the spread, the less they will make.
NASDAQ trades in real time, as opposed to the New York Stock Exchange which can take time between and order and the execution of that order. Because of the real time nature of NASDAQ trades, NASDAQ stocks are heavily favored by day traders who tend to buy and sell stock continuously throughout the day, as opposed to buying stocks for longer term investments.
NASDAQ is also seen as the young and hip market in opposition to the old and conservative New York Stock Exchange. This impression is furthered by the tech heavy nature of the NASDAQ. Companies like Microsoft, Apple, Google, Cisco, Oracle, Intel, and Amazon all trade on NASDAQ. These companies have the image of youth, growth, and the future, while many of the companies on the NYSE are seen as conservative, safe, and steadfast. With a market cap of $4.4 trillion NASDAQ has grown into a major player on the world securities stage.