The stock market has been the most popular form of investment of all time. There are around 60 stock exchanges in the world, The New York Stock Exchange being the largest of them all. The National Association of Securities Dealers Automatic Quotation System, abbreviated as Nasdaq, is the second-largest stock exchange in the world. Read more about bitcoin selling and buying in the Auto-trading Robot platform
It is a US-based stock exchange that revolutionised the way stock exchanges operated. Before its inception, the stock exchanges were mere physical trading platforms. But, Nasdaq introduced computerised systems where investors could buy and sell stocks, hence establishing the first electronic stock market in the world.
This exchange was framed by the National Association of Securities Dealers and is commanded by the US Securities and Exchange Commission. Currently, more than 3000 companies are listed in Nasdaq, including some of the giants, like Apple, Microsoft, Google, and Amazon.
Idiomatically, when people talk about Nasdaq, they usually mean the index and not the stock exchange. Nasdaq Composite Index is a statistical system of a segment of the stock market. There is another index known as the Nasdaq 100 index that stalks around 100 of the most significant and most traded equities on the stock exchange.
The Nasdaq Composite Index, popularly called just ‘Nasdaq,’ is among the most widely used indices. It keeps an eye on the performance of stocks that are traded on the exchange. It is also the most preferred index by the market participants to have a clear view of how the market is performing.
To be a part of the listings of the index, a stock must be solely listed on the Nasdaq stock exchange. It also has to be a regular stock of a US-based firm or be an American Depositary Receipt, or ADR, of a foreign company. According to the listing requirements, a firm’s stocks will be listed under one of these market levels.
Global Select Market: This composite comprises the stocks of the US and international firms and is weighted according to market capitalisation. Firms that are listed here must pass the qualifying standards of Nasdaq.
Global Market: The Global Market of Nasdaq comprises the stocks of firms listed in the US and internationally. These listings are studied by the Listing Qualifications Department of Nasdaq per annum and are transferred to the Global Select Market if found suitable.
Capital Market: Previously known as the small-cap market, the Capital Market is a list of firms with smaller market capitalisations.
Nasdaq has been the prime attention of the tech firms. Half of the index comprises these technology companies. The position and performance of a company in the index are determined by its market capitalisation. Since Nasdaq Composite Index is a market-capitalisation-weighted index, all the companies are weighted according to their market capitalisation. It means that the companies who have a larger market capitalisation impact the performance on the index more significantly than the ones with a smaller market capitalisation.
Various people tend to equate Nasdaq with NYSE or the New York Stock Exchange. But there are various major distinctions between the two of them. As stated previously, the New York Stock Exchange is the largest in the world. The fundamental variance is that Nasdaq is a market of dealers. Here, participants trade through a dealer and not directly among each other. These dealers keep up stock inventories to purchase and sell stocks from their accounts in transactions with customers and dealers. On the contrary, NYSE is an auction market, which allows investors to deal with each other through allotted market makers.
Although both NYSE and Nasdaq are based in New York City, their locations are different. While NYSE has both a physical trading platform and electronic dealing from New Jersey, Nasdaq conducts trades electronically but does not have a physical trading platform. Nasdaq is a tech-heavy index, whereas NYSE consists of companies with a large market capitalisation known as blue-chip firms like Walmart and Coca-Cola.
Since Nasdaq is a tech-heavy index, its gross performance has been quite strong in the last 25 years. Moreover, the companies listed in Nasdaq are growth-oriented. The equities of Nasdaq are also considered to be more volatile than the NYSE, but high returns are expected from it.