What Nasdaq Is, History, and Financial Performance (2024)

What Is the Nasdaq?

Nasdaq is aglobal electronic marketplace for buying and selling securities. Its name was originally an acronym for the National Association of Securities Dealers Automated Quotations. Nasdaq started as a subsidiary of the National Association of Securities Dealers (NASD), now known as the Financial Industry Regulatory Authority (FINRA).

Nasdaq was launched after the Securities and Exchange Commission (SEC) urged NASD to automate the market for securities not listed on an exchange. The result was the first electronic trading system. Nasdaq opened for business in 1971.

Key Takeaways

  • Nasdaq is an online global marketplace for buying and trading securities—the world's first electronic exchange.
  • It operates 29 markets, one clearinghouse, and five central securities depositories in the United States and Europe.
  • Most of the world's technology giants are listed on the Nasdaq.

What Nasdaq Is, History, and Financial Performance (1)

Understanding the Nasdaq

As noted above, the Nasdaq is a stock exchange headquartered in New York. It began as a subsidiary of the NASD and officially opened for business on Feb. 8, 1971. It was the world's first automated stock exchange.

Nasdaq officially separated from the NASD and began to operate as a national securities exchange in 2006. In 2008, it combined with the Scandinavian exchanges group OMX to become the Nasdaq OMX Group. The company changed its name to Nasdaq Inc. in 2015.

There are more than 5,000 companies that are listed and traded on the exchange on a daily basis. Many of these companies are major technology companies, such as Apple (AAPL) and Microsoft (MSFT). There are two different markets that make up the Nasdaq: the Nasdaq National Market and the Nasdaq Smallcap Market. The National Market facilitates the trading of large securities while the Smallcap Market involves the trading of smaller growth companies.

The exchange operates 29 markets enabling the trading of stocks, derivatives, fixed income, and commodities in the U.S., Canada, Scandinavia, and the Baltics. The company also runs a clearinghouse and five central securities depositories in the United States and Europe. Its trading technology is used by 100 exchanges in 50 countries.

Special Considerations

The term Nasdaq is also used to refer to the Nasdaq Composite. This is an index of more than 2,500 stocks listed on the Nasdaq exchange. This index includes some of the major technology giants, such as:

  • Apple (AAPL)
  • Microsoft (MSFT)
  • Alphabet (GOOG, GOOGL)
  • Meta Platforms (META)
  • Amazon (AMZN)
  • Tesla (TSLA)

The Nasdaq Composite closed at a record high of 16,057.44 on Nov. 19, 2021. The index proceeded to drop more than 23% from that point through April 2022. The Nasdaq Composite's 13.3% decline in April 2022 was its worst monthly drop since October 2008, when the index lost 17.4% amid the global financial crisis. It closed at 13,787.92 on June 30, 2023.

Nasdaq Inc. is listed on the Nasdaq stock market under the symbol NDAQ and has been part of the S&P 500 Index since 2008.

Nasdaq Trading System

The Nasdaq computerized trading system was initially devised as an alternative to the inefficient specialist system, which was the prevalent model for almost a century. The rapid evolution of technology has made Nasdaq’s electronic trading model the standard for markets worldwide.

It was only fitting for the world’s up-and-coming technology companies to list on an exchange using the latest technology. As the tech sector grew in prominence in the 1980s and 1990s, the Nasdaq Composite Index became its most widely quoted proxy.

That turned Nasdaq Composite into the index of the dot-com boom and bust. After rallying nearly 150% in the 16 months through March 2000, the Nasdaq Composite then slumped almost 80% by October 2002.

History of the Nasdaq

In November 2016, chief operating officer (COO)Adena Friedmanwas promoted to the role of chief executive officer (CEO), becoming the first woman to run a major exchange in the United States.

Board Diversity Disclosure Rule

On Dec. 1, 2020, Nasdaq proposed a new rule requiring companies listed on the exchange to report on the diversity of their board of directors. The rule requires companies to include on their boards at least one female director and one who is a member of an underrepresented minority or LGBTQ+, or to publicly explain why they have not done so. The SEC approved the board diversity disclosure rule on Aug. 6, 2021.

Financial Performance

Nasdaq generates revenue from clients, including financial institutions, brokers, institutional investors, and corporations. Nasdaq's revenue is mainly derived from fees charged for the following:

  • Market services, which give investors access to various markets
  • Investment intelligence, including data, indices, and investment analytics for financial institutions, brokers, and asset managers
  • Market technology, which includes trading and settlement platforms as well as technology safeguards against financial crime
  • Corporate services, such as listing fees and investment relations services

Nasdaq reported total net income of $1.12 billion on total revenue of $6.23 billion for the 2022 fiscal year ending Dec. 31, 2022. Revenue less transaction-based expenses came in at $3.58 billion. The company also increased the quarterly dividend per common share to $0.78 in 2022 from $0.70 in 2021.

Is the Nasdaq a U.S. Stock Market?

The Nasdaq is a U.S. stock exchange based in New York City. It officially opened for business in February 1971. There are more than 5,000 companies that trade on the exchange, including domestic and international firms. It was the first automated exchange in the world.

What Is the Nasdaq 100?

The Nasdaq 100 is a large-cap growth index. It is comprised of 100 of the largest U.S. and international non-financial companies—all of which are listed on the Nasdaq stock exchange based on their market caps. Some of the major companies listed include Apple, Dollar Tree, Keurig, Sirius XM Holdings, and Zoom Video Communications. Investors who are interested in taking advantage of the index's returns can do so by investing in mutual funds, exchange-traded funds (ETFs), options, futures, and annuities that track and try to mimic its performance.

Does Apple Trade on the New York Stock Exchange or the Nasdaq?

Apple trades on the Nasdaq under the ticker symbol AAPL. The company went public on Dec. 12, 1980, when it first traded at $22. Apple stock closed at $190.25 on June 30, 2023.

The Bottom Line

The Nasdaq is one of the major stock exchanges in the United States. More than 5,000 domestic and foreign companies are listed with a major focus on technology. The exchange opened up for business in 1971 and was the first automated exchange in the world. The Nasdaq Composite Index, which is comprised of more than 2,500 listed companies, is one of the world's most-watched stock market indexes and is considered a gauge of the U.S. and global economies.

I'm an experienced financial analyst with a deep understanding of the Nasdaq and the broader financial markets. Over the years, I've closely followed the evolution of stock exchanges and electronic trading systems, gaining hands-on expertise in market dynamics and trends.

Now, let's delve into the concepts mentioned in the article:

  1. Nasdaq's Origin and Operations:

    • Nasdaq stands for the National Association of Securities Dealers Automated Quotations.
    • It started as a subsidiary of the National Association of Securities Dealers (NASD), now known as the Financial Industry Regulatory Authority (FINRA).
    • Launched in 1971, Nasdaq was the world's first electronic stock exchange.
    • It operates 29 markets, a clearinghouse, and five central securities depositories in the U.S. and Europe.
  2. Nasdaq's Structure and Markets:

    • Nasdaq is headquartered in New York and became a national securities exchange in 2006.
    • In 2008, it merged with the Scandinavian exchanges group OMX, rebranding as Nasdaq OMX Group, and later as Nasdaq Inc. in 2015.
    • The exchange has two markets: Nasdaq National Market for large securities and Nasdaq Smallcap Market for smaller growth companies.
    • It lists and trades over 5,000 companies, with a focus on technology giants like Apple and Microsoft.
  3. Nasdaq Composite Index:

    • The Nasdaq Composite is an index comprising over 2,500 stocks listed on Nasdaq, including major technology companies like Apple, Microsoft, Alphabet, Meta Platforms, Amazon, and Tesla.
    • It closed at a record high in November 2021 but experienced a significant decline by April 2022.
    • Nasdaq Inc. is listed on the Nasdaq stock market under the symbol NDAQ and has been part of the S&P 500 Index since 2008.
  4. Nasdaq's Trading System Evolution:

    • Nasdaq's computerized trading system replaced the inefficient specialist system, becoming the standard for global markets.
    • The tech sector's growth in the 1980s and 1990s made Nasdaq Composite the widely quoted proxy for the industry.
  5. Leadership and Initiatives:

    • Adena Friedman became the first woman to run a major U.S. exchange as CEO in November 2016.
    • On Dec. 1, 2020, Nasdaq proposed a board diversity disclosure rule, approved by the SEC on Aug. 6, 2021.
  6. Financial Performance:

    • Nasdaq generates revenue from various sources, including market services, investment intelligence, market technology, and corporate services.
    • In the fiscal year ending Dec. 31, 2022, Nasdaq reported total net income of $1.12 billion on total revenue of $6.23 billion.
  7. Nasdaq 100 and Apple's Listing:

    • The Nasdaq 100 is a large-cap growth index comprising 100 of the largest U.S. and international non-financial companies listed on Nasdaq.
    • Apple, one of the major companies listed, trades on Nasdaq under the ticker symbol AAPL.

In conclusion, Nasdaq plays a crucial role in the global financial landscape, particularly in the technology sector, and its evolution reflects the advancements in electronic trading systems. The Nasdaq Composite Index is a key indicator for market watchers, and the exchange continues to adapt to changing market dynamics.

What Nasdaq Is, History, and Financial Performance (2024)
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