The Nasdaq Stock Exchange is an American market for trading company shares, established with the aim of enabling the trading of companies’ shares in an automated manner through an electronic network that provides more transparency and faster execution of buying and selling transactions as an alternative to the traditional method. It is considered the first electronic stock exchange in the world.
The name NASDAQ is an abbreviation of the National Association of Securities Dealers Automated, which means the National Association of Dealers of Automated Securities, which is the legal person or company (the stock exchange is a for-profit company in itself) founding this stock exchange and it is regulated and supervised by the US Securities and Exchange Commission.
Nasdaq opened on February 8, 1971, with more than 50 listed companies. At that time, the new basic service of Nasdaq was to provide an electronic price display system without allowing trading, which was often done over the phone, but it helped reduce the difference between the selling price and the purchase price or what is known as the spread, which greatly reduced trading costs, with great speed and transparency in access to prices.
This gave a great advantage to traders over the brokerage firms that were making a lot of their income from the spread difference, which led the latter to avoid the Nasdaq stock exchange in its early years of operation before its electronic method of work spread in other stock markets.
In 1985 the NASDAQ-100 index and its symbol NDX were created, which is today among the three most important indices in the United States along with the Dow Jones Industrial Average and the Standard & Poor’s 500 Index.
Nasdaq is considered one of the leading stock exchanges in the field of electronic trading, as it was the first stock exchange to launch a website on the Internet, nasdaq.com in 1996, and also the first stock exchange to launch an application for smart phones in 2009.
In March of 2001, the Nasdaq index reached record levels after a strong rally of more than 284% in a period of 17 months, before it collapsed at the same speed as shown in the attached chart from UFX (UFX).
This incident was later known as the Internet bubble or the dot-com bubble, because the main culprit was the newly established Internet companies whose shares had ballooned a lot, and the effects of this bubble extended to the entire global financial markets.
Nasdaq composition and most important indicators:
Currently, Nasdaq includes more than 3,800 companies listed for trading from different countries of the world, and it is the second largest stock exchange in the world in terms of market capitalization of listed companies after the New York Stock Exchange and the first in the world in terms of trading volume.
The markets depend on two main indicators to measure performance on the Nasdaq Stock Exchange, the first is the NASDAQ-100 index and its symbol NDX, which we talked about previously, and it measures the performance of the 100 largest companies listed on Nasdaq.
The second is the Nasdaq Composite Index, symbol IXIC, which measures the performance of 3000 listed companies.
Nasdaq includes all kinds of companies from different economic sectors, but it is more famous as a stock exchange for technology companies and Internet companies in particular such as Google, Facebook, Microsoft and many others.
The Nasdaq 100 NDX index is considered the primary indicator for those interested in the performance of technology companies, because it consists mostly of these companies.