Nasdaq

NASDAQ is an abbreviation (as opposed to an acronym) - the letters stand for National Association of Securities Dealers Automated Quotations. That's quite a mouthful and to most people, even those familiar with financial terminology, it wouldn't be too easy to interpret just what the organization does. In fact, NASDAQ is the largest (and most influential) electronic stock market in America and therefore in the world. NASDAQ's prices are quoted "in the same breath" and given as much authority as those of the leading conventional markets. In New York and Toronto, the main indices are quoted first but it's the NASDAQ index that appears on the next line. In the United Kingdom, the "senior" index is the FTSE100 (pronounced "footsie" although it has nothing to do with what goes on under the dining table) but the NASDAQ is quoted next to the NYSE, Paris Bourse and Frankfurt prices. The FTSE is operated by the "Financial Times," Britain's equivalent to the Wall Street Journal but, if anything, it has more influence than its American counterpart - it's also printed on pink paper! Even in the far east, it's the NASDAQ index that's monitored by Japanese and Hong Kong investors as closely as they monitor the Nikkei and the Hang Seng indices. NASDAQ has approximately 3,300 participating member companies. It lists more stocks and, on average, trades more shares each day than any other U.S. market. It's home to category-defining organizations - leaders in every commercial and industrial activity through technology, retail, communications, financial services, transportation, media and biotechnology. NASDAQ is the primary market for trading NASDAQ-listed stocks. Approximately 54% of NASDAQ-listed shares traded are reported to NASDAQ systems. So what is it that NASDAQ does differently? The main difference is that there aren't really any people involved! The popular portrayal of a stock exchange floor as seen on Television is of dynamic young (mainly) men (mainly), waving their arms about, shouting and getting excited. There's very little of that at NASDAQ: The sounds will be of computers clicking - although anything that might make too much noise will probably be consigned to an acoustic cabinet, and the odd conversation. This human less operation has many and obvious advantages over its traditional predecessors. The biggest plus, from everybody's point of view, is cost. Without salaries to pay the costs of operating the exchange are very much lower than those of NYSE for example. Once the equipment has been installed and commissioned, only routine maintenance and development are needed - the everyday expenses of trading are minimal. This means that the commissions and charges to investors can be lower - that's to everybody's advantage - the investors save money and the exchange gains clients for that very reason. The side effect of this is that spreads can be narrower - it's always mid-prices that are quoted so investors and brokers will be able to judge more easily what the buying and selling prices actually are. The other major advantage is speed. Transactions are, for practical purposes, instant. Investors have little scope to worry about whether or not the broker has been able to meet the price they're looking for - the time scales are so short that prices have little opportunity to move between an order being placed and actually being fulfilled. NASDAQ has changed the way stock markets work - mainly to everybody's advantage.

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