The National Association of Securities Dealers Automated Quotations (NASDAQ) is an electronic stock exchange that was developed from the over-the-counter trading system. It is known for being the market of choice for many technology companies. It trades on a computer screen, and it's the largest exchange of its type in America. The NASDAQ trades more in share volume than any other electronic exchange in the world, and it operates overseas electronic exchanges as well.
Liberal listing requirements is of the reasons that the NASDAQ is one of the world's most popular exchanges for companies looking to sell stock. While the New York Stock Exchange requires its initial listings to have a market value of at least $60 million dollars, the NASDAQ only requires its companies to have an initial value of $8 million dollars. As a result, the NASDAQ offers investors a broader range of companies to invest in. In addition to the initial value limitations, the annual listing fee that the NASDAQ charges its companies is lower as well; in 2011, the maximum annual listing fee is $99,500. In comparison, the NYSE annual fee can go as high as $500,000.
Pre-Market and After-hours Trading
While exchanges like the NYSE are at the mercy of the specialist who manages a stock's trading -- and therefore must trade only during open hours -- NASDAQ traders have extended trading hours. In the morning, the premarket opens at 7:00 a.m. and lasts until the market officially opens at 9:30 a.m. In the evening, after-hours trades continue until 8:00 p.m.
Traders are able to enjoy automated trades from the comfort of their desks through the NASDAQ's Internet-based trading exchange. Online access eliminates the need to administer trades on the investor's behalf. Instead, the investor can choose when to buy and sell on his own. "Forbes" magazine referred to this advantage as "a purer market," because unlike the NYSE's specialists, the NASDAQ market maker is there to provide liquidity, but does not manage every trade.
Opening and Closing Auctions
Another advantage of the NASDAQ is the precision of the opening and closing auctions. A NASDAQ investor may rely upon the certainty that the market will open precisely at 9:30am, while professional investors who are using the day's close to benchmark stock price know that they can rely upon the 3:50 p.m. cut-off time to participate; the market closes at 4:00 p.m., but trades entered after the closing auction takes place at 3:50 p.m. are considered after-hours. Investors who rely upon personnel-driven exchanges must wait until the specialist is able to close the books -- as a result, the likelihood of human error is greater than with the NASDAQ exchange.
- "Forbes"; NYSE Vs. Nasdaq; Ari Weinberg; Aug. 13, 2003
- Finance Directory; Listing Requirements to Trade on the NYSE, NASDAQ and the AMEX; Jason Bacot; March 25, 2011
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Lisa Bigelow is an independent writer with prior professional experience in the finance and fitness industries. She also writes a well-regarded political commentary column published in Fairfield, New Haven and Westchester counties in the New York City metro area.