NASDAQ

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NASDAQ in Times Square, New York City.

NASDAQ (originally an acronym for National Association of Securities Dealers Automated Quotations system) is an American electronic stock exchange. It was founded in 1971 by the National Association of Securities Dealers (NASD), who divested it in a series of sales in 2000 and 2001. It is owned and operated by The Nasdaq Stock Market, Inc. (NASDAQ: NDAQ) the stock of which was listed on its own stock exchange in 2002. NASDAQ is the largest electronic screen-based equity securities market in the United States. With approximately 3,200 companies, it lists more companies and, on average, trades more shares per day than any other U.S. market. The current chief executive officer is Robert Greifeld.

Contents

[edit] History

See also: Economy of New York City

When it began trading on February 8, 1971, it was the world's first electronic stock market. At first, it was merely a computer bulletin board system and did not actually connect buyers and sellers. The NASDAQ helped lower the "spread" but somewhat paradoxically was unpopular among brokerages because they made much of their money on the spread. Over the years, NASDAQ became more of a stock market by adding trade and volume reporting and automated trading systems. NASDAQ was also the first stock market to advertise to the general public, highlighting NASDAQ-traded companies (usually in technology) and closing with the declaration that NASDAQ was "the stock market for the next hundred years."

Until 1987, most trading occurred via the telephone, but during the October 1987 stock market crash, market makers often didn't answer their phones. To counteract this, the Small Order Execution System (SOES) was established, which provides an electronic method for dealers to enter their trades. NASDAQ requires market makers to honor trades over SOES.<ref>Wells, Rob. "'Market for Next 100 Years' is 25", Associated Press.</ref>

On July 17, 1995, the NASDAQ Composite index closed above the 1,000 mark for the first time. The index peaked at an intra-day high of 5,132.52 on March 10, 2000, which signaled the beginning of the end of the dot-com stock market bubble. The index declined to half its value within a year, and finally found a bear market bottom at its intra-day low of 1,108.49 on October 10, 2002. While the index has gradually recovered since then, reaching a six-year monthly closing high above the 2,400 level on November 30, 2006, it is still (as of late 2006) valued at less than half its peak.

[edit] Merger attempt with London Stock Exchange

In December of 2005, the London Stock Exchange (LSE) rejected a £1.6 billion takeover offer from Macquarie Bank. The LSE described the offer as "derisory." It then received a bid in March of 2006 for £2.4 billion from NASDAQ, which was also rejected by the LSE. NASDAQ later pulled its bid, and less than two weeks later on April 11, 2006, struck a deal with LSE's largest shareholder, Ameriprise Financial's Threadneedle Asset Management unit, to acquire all of that firm's stake, consisting of 35.4 million shares, at £11.75 per share.<ref name="wsj_20060411_nasdaq_stake">Patrick, M., Lucchetti, A., Reilly, D., Taylor, E.. "Nasdaq Acquires 15% of LSE", The Wall Street Journal, 2006-04-11.</ref> NASDAQ also purchased 2.69 million additional shares, resulting in a total stake of 15%. While the seller of those shares was undisclosed, it occurred simultaneously with a sale by Scottish Widows of 2.69 million shares.<ref name="forbes_nasdaq_sw_20060412">"Scottish Widows says has sold 2.7 mln LSE shares at 1,175 pence", Forbes, 2006-04-12.</ref> The move was seen as an effort to force LSE to negotiate either a partnership or eventual merger, as well as to block other suitors such as NYSE.<ref name="bbg_nasdaq_stake">Ortega, E.. "Nasdaq Buys 15 Percent Stake in LSE for $782 Million", Bloomberg News, 2006-04-11.</ref> Subsequent purchases increased NASDAQ's stake to 25.1%, holding off competing bids for several months.<ref name="wsj_20050404">MacDonald, A., Lucchetti, A.. "In LSE Stakes, Nasdaq Advances, Euronext Falls", The Wall Street Journal, 2006-05-04.</ref><ref name="wsj_20060411">Lucchetti, A., MacDonald, A.. "Nasdaq Lifts Its LSE Stake to 24%", The Wall Street Journal, 2006-05-11.</ref><ref name=""reu_20060519">"Nasdaq raises LSE stake, making rival bids harder." Goldsmith, B. and Elliott, M. Reuters. May 19, 2006.</ref> United Kingdom financial rules required that NASDAQ wait for a period of time before renewing its effort. Within a month or two of the expiration of this period, NASDAQ increased its stake to 28.75% and relaunched a formal tender offer at the minimum permitted bid of £12.43 per share, which was the highest NASDAQ had paid on the open market for its existing shares.<ref name="wsj_20061120">Lucchetti, A., MacDonald, A.. "Nasdaq Makes Bid to Buy Rest of London Stock Exchange", The Wall Street Journal, 2006-11-20.</ref> On prior occasions, NASDAQ had been spurned by LSE chief Clara Furst, and this time elected to go directly to the board of the London exchange. LSE's options had diminished by this time as two of the three most likely competing bidders, NYSE Group and Euronext, were close to finalizing their own merger, while Deutsche Börse, the third, had dropped out of the contest.<ref name="wsj_20061120" /> The LSE immediately rejected this bid, stating that it "substantially undervalues" the company.<ref name="bbc_20061120_reject">"LSE rejects £2.7bn Nasdaq offer", BBC News, 2006-11-20.</ref>

[edit] Timeline/Milestones

  • 1961 - Congress authorizes the Securities and Exchange Commission (SEC) to conduct a study of fragmentation in the over-the-counter market. The SEC proposes automation as a possible solution and charges the National Association of Securities Dealers, Inc. (NASD) with its implementation.
  • 1971 - On February 8, the National Association of Securities Dealers Automated Quotations (NASDAQ) begins trading, with median quotes for 2,500 over-the-counter securities.
  • 1976 - NASDAQ purchased the assets of the automated quotation NASDAQ System from its builder and operator, Bunker Ramo Corporation.
  • 1980 - NASDAQ releases inside quotations, which promptly narrows displayed and published spreads on more than 85 percent of its securities.
  • 1982 - The National Market System (NMS) is created for NASDAQ’s 40 highest volume securities for up-to-the-minute reporting of trades.
  • 1984 - Small Order Execution System (SOES) automatically executes small orders against the best quotations, making greater volume and efficiency in trading possible.
  • 1985 - The NASDAQ-100 Index, which includes 100 of the largest domestic and international non-financial companies listed on NASDAQ based on market capitalization, begins with a base of 250.00.
  • 1986 - NASDAQ opens fully redundant backup system to ensure reliable market.
  • 1987 - NASDAQ Workstation, a PC-based platform, gives traders a faster tool and greater flexibility in customizing their service.
  • 1989 - The StockWatch Automated Tracking system (SWAT) is launched, bringing state-of-the-art sophistication to the evaluation of NASDAQ securities for abnormal activity.
  • 1990 - SelectNet enhances opportunities to find and execute transactions at the best prices at greater volume.
  • 1991 - Introduction of the NASDAQ International Service enables firms and investors around the globe to participate in the trans-Atlantic NASDAQ network during European trading hours.
  • 1991 - NASDAQ launches its first television advertising campaign with a series of three advertisements.
  • 1993 - NASDAQ develops three new indexes that enable investors to track key growth industries: biotechnology, computer and telecommunications.
  • 1995 - NASDAQ Workstation II is unveiled, and the state-of-the-art surveillance tool, RADAR, is introduced.
  • 1996 - The NASDAQ Web site–– www.NASDAQ.com ––begins operating, quickly becoming one of the most visited investor sites on the Internet.
  • 1997 - The SEC approves NASDAQ's proposal to reduce the minimum quotation increment from 1/8 of a dollar to 1/16 of a dollar for stocks trading above $10. New SEC Order Handling Rules begin to phase in, narrowing spreads and enhancing market information.
  • 1997 - NASDAQ opens its first MarketSite at 33 Whitehall Street in NYC and for the first time begins to offer Market Open ceremonies and broadcasts.
  • 1997 - NASDAQ is the first stock market to offer its listed companies an online service, which today is known as NASDAQ Online.
  • 1998 - In conjunction with the Stock Exchange of Hong Kong, NASDAQ announces a partnership to provide investors worldwide with information about their respective markets on a new, joint Internet service.
  • 1999 - NASDAQ becomes the world’s biggest stock market by dollar volume.
  • 1999 - The NASDAQ-100 Index Tracking Stock (QQQ) launches and sees 2.6 million shares traded in the first two hours.
  • 1999 - NASDAQ moves the MarketSite to NYC’s Times Square, featuring high visibility broadcast studios and the largest outdoor video screen in the world.
  • 2000 - NASDAQ membership votes overwhelmingly to restructure and spin off NASDAQ into a shareholder-owned, for-profit company.
  • 2001 - NASDAQ sets new share volume record — more than 3.19 billion shares traded.
  • 2001 - As part of its global expansion efforts, NASDAQ opens liaison office in Bangalore, India.
  • 2001 - NASDAQ becomes the first U.S. stock market to meet ISO 9001 quality standards.
  • 2001 - NASDAQ launches the final phase of SuperSoes.
  • 2002 - NASDAQ completes repurchase of 33.8 million shares of NASDAQ common stock owned by the NASD for consideration valued at $439 million or $13 per share – another major step toward NASDAQ’s separation from the NASD.
  • 2002 - Jet Blue lists the shares of its IPO on NASDAQ – becoming the 14th airline to trade on NASDAQ.
  • 2002 - On May 6, NASDAQ distributes its first annual report to shareholders, issuers, employees and other key constituencies for the year ended December 31, 2001.
  • 2002 - NASDAQ launches SuperMontage — the next generation market platform — creating more transparency, access to liquidity and stable trading.
  • 2002 - NASDAQ unveils the Market Intelligence Desk, which provides listed companies with a centralized point-of-contact for detailed information regarding their stocks’ trading activity, news coverage, analyst coverage and chat room activity.
  • 2002 - NASDAQ warrants to public stockholders expire, allowing NASDAQ to be quoted on the OTCBB.
  • 2003 - Hardwick (Wick) Simmons resigns in April as Chief Executive of NASDAQ. Mr. Simmons announced in December 2002 his intention to retire in 2003 when his replacement was selected. The Board of Directors of NASDAQ names Robert Greifeld President and Chief Executive Officer. H. Furlong Baldwin is elected non-executive Chairman.
  • 2003 - The Fidelity NASDAQ Composite Index Tracking Stock (ONEQ), an ETF based on the NASDAQ Composite Index, begins trading in October.
  • 2003 - Robert Greifeld unveils his strategic vision. In June, he announces “NASDAQ is relentlessly driven to be the best-performing, fairest, fastest, most transparent stock market in the world.”
  • 2004 - NASDAQ launches in March the NASDAQ Market Center, a new high-capacity trading platform for NYSE, AMEX, and NASDAQ securities, including exchange traded funds (ETF). The platform incorporates all of NASDAQ’s trading systems on one fast and functionality-driven system.
  • 2004 - The NASDAQ Closing Cross begins operating in April, becoming the first successful electronic auction in the U.S. that executes all shares for each stock at a single price. The Closing Cross had a record day when it calculated the entire family of Russell indexes during their annual reconstitution on June 25. A total of approximately 333 million shares were executed at the 4 p.m. close, exceeding the prior record of 24 million.
  • 2004 - TotalView, NASDAQ’s flagship proprietary data product, is enhanced in May to display more depth, resulting in an approximate 1,400-percent increase in displayed depth on the first day the enhancement was operational.
  • 2004 - NASDAQ wins Google’s landmark initial public offering in August and 147 others in 2004.
  • 2004 - NASDAQ launches the Opening Cross, a fully transparent process auction process for opening the NASDAQ market, in September.
  • 2004 - NASDAQ acquires Brut from SunGard Data Systems Inc. in September, accelerating NASDAQ’s growth initiatives and enhancing NASDAQ’s competitive position.
  • 2004 - The NASDAQ-100 Index Tracking Stock transfers its listing to NASDAQ from the American Stock Exchange effective December 1. It began trading under the symbol “QQQQ.”
  • 2004 - NASDAQ exports its leading ETFs globally, with QQQ to Japan, Israel and Mexico, and EQQQ to Switzerland and Germany.
  • 2005 - In January, NASDAQ announces it completed the acquisition of a 50 percent ownership interest in The NASDAQ Insurance Agency from a wholly owned subsidiary of American International Group, Inc., making The NASDAQ Insurance Agency a wholly owned subsidiary of The NASDAQ Stock Market.
  • 2005 - NASDAQ welcomes the Chicago Mercantile Exchange to the dual listing program in April, and welcomes the first closed-end funds to the program.
  • 2005 - Nuveen Equity Premium Advantage Fund dual listed in August, and Nuveen Equity Premium Income Fund and Nuveen Equity Premium Opportunity Fund dual listed in December.
  • 2005 - NASDAQ transfers the Over-the-Counter Bulletin Board® (OTCBB) business and the trade reporting of all other Over-the-Counter (OTC) securities to NASD. This development helped facilitate corporate structure changes related to NASDAQ achieving exchange status.
  • 2005 - Premium Advantage Fund dual listed in August, and Nuveen Equity Premium Income Fund and Nuveen Equity Premium Opportunity Fund dual listed in December.
  • 2005 - NASDAQ holds its first remote Opening and Closing Bell in August, from Cisco Systems’ headquarters in San Jose, CA, to celebrate Cisco’s 20th anniversary. In December, NASDAQ holds it first remote Opening Bell outside the U.S. — in London —to kick off NASDAQ’s 16th Investor Conference.
  • 2005 - In September, NASDAQ acquires Carpenter Moore Insurance Services, a privately held San Francisco-based insurance brokerage firm specializing in management liability. As a result of this transaction, NASDAQ’s insurance business is ranked as a top 10 provider of management liability insurance with a total of seven offices throughout the country, serving over 2,000 existing clients, including 12 of the NASDAQ-100 companies.
  • 2005 - NASDAQ announces in September the introduction of NASDAQ OrderView®, a new data feed that facilitates program and algorithmic trading. OrderView is a complement to NASDAQ's flagship TotalView® Data Product, providing critical TotalView information in a manner better suited for automated trading operations.
  • 2005 - NASDAQ completes the acquisition of the INET ECN, designed to provide NASDAQ with a technologically superior trading platform, enhance NASDAQ’s ability to compete with U.S. and international market centers, and generate significant savings through technology.
  • 2005 - NASDAQ welcomes Charles Schwab and Cadence Design Systems as sole NASDAQ issuers. Both switched their listings to NASDAQ from NYSE after participating in NASDAQ’s dual listing program. NASDAQ welcomed Harmony Gold as its first dual listed international company.
  • 2005 - In December, NASDAQ completes its acquisition of Instinet Group Incorporated and sells Instinet’s Institutional Broker division to Silver Lake Partners.
  • 2006 - NASDAQ receives unanimous SEC approval in January to operate as a national securities exchange, allowing NASDAQ to take the final steps needed to complete its separation from the NASD.
  • 2006 - NASDAQ announced in January plans to conduct an underwritten public offering of its common stock. NASDAQ plans to sell its own shares in the offering.
  • 2006 - NASDAQ welcomes UAL Corporation, parent of United Airlines, in February. UAL remotely opens and closes the market from Chicago and San Francisco, respectively.
  • 2006 - For the first time, the total market capitalization ($25 billion) of the companies that switched to NASDAQ from the NYSE exceeded the total market value ($5 billion) of those that transferred from NASDAQ to the NYSE.
  • 2006 - NASDAQ enters into a definitive agreement to acquire Shareholder.com, a shareholder communications and investor intelligence firm, enabling NASDAQ to offer Shareholder.com's comprehensive suite of services to its listed and other public companies.
  • 2006 - NASDAQ dual-lists Ivanhoe Mines on the NASDAQ National Market — the first Canadian company to dual list on NASDAQ and the NYSE.
  • 2006 - NASDAQ will introduce the NASDAQ Crossing Network, a fully anonymous trade execution facility designed to facilitate the execution of large trades, in the second quarter. All U.S. securities will be included in the intraday cross.

[edit] Business

NASDAQ allows multiple market participants to trade through its Electronic Communication Networks (ECNs) structure, increasing competition. The Small Order Execution System (SOES) is another NASDAQ feature, introduced in 1987, to ensure that in 'turbulent' market conditions small market orders are not forgotten but are automatically processed. With approximately 3,200 companies, it lists more companies and, on average, trades more shares per day than any other stock exchange in the world. It is home to companies that are leaders across all areas of business including technology, retail, communications, financial services, digging, transportation, media and biotechnology. NASDAQ is the primary market for trading NASDAQ-listed stocks.

[edit] Quote availability

NASDAQ quotes are available at three levels. Level I shows the highest bid and lowest offer -- the inside quote. Level II shows all public quotes of market makers together with information of market makers wishing to sell or buy stock and recently executed orders. Level III is used by the market makers and allows them to enter their quotes and execute orders.<ref>Template:Cite web</ref>

[edit] See also

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