What Does NASDAQ Consist Of?

The National Association of Securities Dealers Automated Quotations system (NASDAQ) is one of two major stock exchanges based in the United States. The NASDAQ shares similarities with its American peer the New York Stock Exchange (NYSE), but the NASDAQ operates somewhat differently and is composed of a distinctly different mix of publicly traded companies' stock. Understanding the various components that come together to make the NASDAQ work can shed insight into the different options stock traders have available in the U.S.

NASDAQ Technology

Unlike the NYSE, the NASDAQ is a completely electronic exchange, meaning there is no physical trading floor for NASDAQ stocks. The NASDAQ relies on advanced electronic communications networks to store large amounts of financial data, calculate and display bid/ask prices and facilitate trades from anywhere in the world. The NASDAQ did not come onto the scene until 1971, when early-stage computer technology began to allow computers to transmit data across vast distances via the Internet.

NASDAQ Traders

Both individuals and institutional investors participate in the NASDAQ, and all traders make trades via an online platform. Most online stock brokerages allow traders access to stocks listed on both the NASDAQ and the NYSE, in addition to numerous foreign exchanges, from a single account. Because of this, most NASDAQ traders also trade on the NYSE. Since the NASDAQ and NYSE feature a different set of stocks, the two exchanges do not have to worry about competing for business from traders.

NASDAQ Companies

Listing requirements for the NASDAQ are much more lenient than NYSE requirements. Companies wishing to list their stocks on the NASDAQ must have a market value of at least $8 million, for example, compared with $60 million for the NYSE. Because of this, the NASDAQ almost always contains corporations that wish to list on the NYSE but have not yet met the minimum listing requirements. The NASDAQ hosts a range of highly valuable technology companies, including Microsoft and Google, that emerged on the NASDAQ as small companies and remained loyal to the exchange throughout their growth stages and into maturity.

Merged Exchanges

Talk of stock exchanges merging around the world gained widespread attention in the early 21st century, with exchanges in London, Toronto and other areas eyeing potential mergers with American stock exchanges. As of the date of publication, NASDAQ has created a combined exchange with Switzerland-based OMX, but has been turned down for potential mergers with the London Stock Exchange and others. A number of traders in the U.S. see an eventual NASDAQ/NYSE merger as an inevitable result of growing competitive pressures around the world, as domestic stock traders continue to gain access to more foreign markets.