NASDAQ

Definition

NASDAQ is a major American stock exchange located in New York City, known for trading shares of technology and other growth-oriented companies. It is the second-largest stock exchange in the world by market capitalization, serving as a hub for innovative and high-performing public companies across various industries.

5 Must Know Facts For Your Next Test

1. NASDAQ was founded in 1971 and is the first electronic stock market, facilitating trading through a network of computers rather than a physical trading floor.
2. NASDAQ is home to many of the world's leading technology and innovative companies, including Apple, Microsoft, Amazon, and Google.
3. The NASDAQ Composite Index is a market capitalization-weighted index that tracks the performance of over 3,000 stocks listed on the NASDAQ exchange.
4. NASDAQ operates as a self-regulatory organization (SRO), responsible for overseeing and enforcing rules and regulations for its listed companies.
5. Compared to the New York Stock Exchange (NYSE), NASDAQ is generally associated with smaller, more volatile, and growth-oriented companies.

Review Questions

• Explain the significance of NASDAQ as a major stock exchange in the context of corporations.
  • NASDAQ plays a crucial role in the corporate landscape, serving as a hub for many of the world's leading technology and innovative companies. As a stock exchange, NASDAQ provides public companies with access to capital markets, allowing them to raise funds for growth and expansion. This, in turn, enables corporations to invest in research and development, hire talented employees, and drive innovation. The prestige of being listed on NASDAQ can also enhance a company's reputation and credibility, making it more attractive to investors and potential business partners.
• Describe the unique features of NASDAQ that differentiate it from traditional stock exchanges like the NYSE.
  • Unlike the NYSE, which operates on a physical trading floor, NASDAQ is an electronic exchange, facilitating trading through a network of computers. This electronic structure allows for faster and more efficient trading, particularly for high-volume, high-volatility stocks. Additionally, NASDAQ is generally associated with smaller, more growth-oriented companies, often in the technology and innovation sectors, whereas the NYSE tends to list larger, more established corporations. This difference in the types of companies listed on NASDAQ contributes to its distinct market dynamics and investment opportunities for corporations and investors.
• Analyze the role of NASDAQ as a self-regulatory organization (SRO) in the context of corporate governance and oversight.
  • As a self-regulatory organization, NASDAQ plays a crucial role in overseeing and enforcing rules and regulations for its listed companies. This includes monitoring the financial reporting, corporate governance practices, and compliance with disclosure requirements of the corporations traded on the exchange. By acting as a regulatory body, NASDAQ helps to ensure the integrity and transparency of the market, which is essential for maintaining investor confidence and supporting the overall health of the corporate ecosystem. This regulatory function of NASDAQ is particularly important in the context of corporations, as it helps to protect shareholders and promote responsible corporate behavior, ultimately contributing to the long-term success and sustainability of the companies listed on the exchange.

Related terms

Stock Exchange: A stock exchange is a marketplace where public companies list and trade their stocks, allowing investors to buy and sell shares of these companies.

Market Capitalization: Market capitalization refers to the total value of a company's outstanding shares, calculated by multiplying the current stock price by the total number of shares.

Over-the-Counter (OTC) Market: The OTC market is a decentralized market where securities not listed on a formal exchange, such as NASDAQ, are traded directly between parties.