Table of Contents
What is the Nasdaq?
Significance of the Nasdaq & how it works
Nasdaq listing requirements
Nasdaq’s major indexes
Nasdaq vs. NYSE: important differences
How to invest in Nasdaq stocks
The bottom line
Jun 21, 2022
7 min read
The Nasdaq is the second-largest major stock exchange, strongly reflecting the market moves of tech and high-growth companies, including those in biotech and health care.
The Nasdaq is the second-biggest of the world’s 60 stock and securities exchanges, behind only the New York Stock Exchange (NYSE). It lists more than 3,800 companies representing industry groups such as technology, software, internet, consumer services, and health care. It is known for attracting innovative companies and industry upstarts, and it includes some of the world’s heaviest hitters, such as Amazon, Microsoft, Facebook, Apple, Starbucks, and Tesla.
Nasdaq is an acronym for National Association of Securities Dealers Automated Quotations. People now use the name to refer to the Nasdaq Composite, one of its indexes, with more than 3,000 stocks. Nasdaq also refers to the Nasdaq Stock Market LLC, the exchange itself, which is owned by Nasdaq Inc. The company also owns the Philadelphia Stock Exchange and the Boston Stock Exchange, as well as seven European exchanges.
The Nasdaq trading platform opened in 1971 as an electronic quotation system for share prices before evolving into the world’s first fully electronic stock market with transactions taking place over an automated network of computers, not on a physical trading floor.
Before the Nasdaq, stock exchanges were in brick-and-mortar buildings where traders came together on trading floors to buy and sell securities. These exchanges relied on people who worked on the floor and were responsible for trading specific stocks.
The Nasdaq created an alternative, with buying and selling taking place over a computer network. This transformed trading, increasing the pace at which investors could buy and sell. Today, electronic trading is standard. Even the NYSE, famous for its trading floor full of shouting brokers negotiating orders with hand signals, has mostly switched to electronic trading.
Regardless of where the trading takes place, it is facilitated by market makers, which are dealers or traders whose job is to maintain efficient trading. The Nasdaq uses broker-dealer members of Nasdaq who maintain their own stock supply and buy and sell from their inventory to individuals and other dealers. Whether they are called specialists or dealers, they perform a similar function by ensuring markets remain liquid, buying when others are selling and selling when others are buying.
From its beginning, the Nasdaq used a quotation system that facilitated over-the-counter (OTC) trading of securities outside formal exchanges through dealer networks. In its early years, Nasdaq was referred to as an OTC market. Today, it trades listed stocks as well as OTC stocks. When it added automated trading systems that could create trade and volume reports, it became the first exchange with online trading. It was also the first exchange to launch a website and store records in the cloud.
To list a stock or security on the Nasdaq exchange, a company must:
, have one director who self-identifies as female and one who self-identifies as an underrepresented minority or LGBTQ+
Companies pay a $25,000 application fee and pay between $150,000 and $295,000 in entry fees if the listing is successful. It can take four to six weeks for a listing to be approved.
Nasdaq companies, once they’re approved, will list in one of three tiers on Nasdaq:
This comprises U.S. and international stocks that meet Nasdaq’s highest standards. Being part of the Global Select Market is considered a mark of the company’s international importance.
This mid-cap market consists of companies that have a broad national and/or international reach and meet criteria on income, equity, market value, or assets/revenue, and have at least 1.1 million publicly traded shares.
The companies on the Capital Market, formerly called the SmallCap Market, is a large list of smaller cap companies that still meet standards, such as 1 million publicly traded shares.
The Nasdaq Composite Index tracks nearly 3,000 stocks listed on the Nasdaq exchange. This index includes everything but mutual funds, preferred stocks, and derivatives. It often is used as a benchmark for US equity markets, and because it is heavily weighted in technology stocks, it is considered a good gauge for the health of the tech industry.
This index tracks the 100 largest and most actively traded securities within the Nasdaq Composite. While the Composite Index is considered more influential, traders who are interested in futures, options, and exchange-traded funds pay a lot of attention to the Nasdaq 100.
The Nasdaq is second to the NYSE based on the total value of the shares traded daily, although trading volume is roughly the same, at about 4 billion shares. But one of the main differences between Nasdaq and NYSE is the former’s focus on technology stocks. Its rise paralleled that of the technology industry in the 1980s and ’90s.
Because listing requirements for the Nasdaq are not as stringent as the NYSE, and the Nasdaq comprises so many tech and high-growth companies, trading tends to be more volatile than on the NYSE, which has older, more established companies.
Other key differences between the exchanges include:
Investors could create their own portfolio that replicates the Nasdaq 100 or selections from Nasdaq Composite by buying individual stocks. But purchasing individual stocks can be risky, and it would be costly and complicated to buy the shares in the indexes in proportion to their weightings.
Other ways to invest in Nasdaq stocks include buying index funds or exchange-traded funds (ETFs) that track the performance of the index. Some of these include:
Nasdaq Inc. (NDAQ) is actually a public company, and investors can buy shares. However, you’d be investing in the company, not the stocks on its exchange.
The Nasdaq is the second-largest major stock exchange, strongly reflecting the market moves of tech and high-growth companies, including those in biotech and health care. The performance of these exchanges, tracked by indexes, also are good gauges of public sentiment about the economy.
Perhaps the biggest difference between the Nasdaq and NYSE is the kinds of stocks investors will find listed. The NYSE has a higher share of mature companies, while Nasdaq hosts more new companies with volatile shares.
At Titan, we are value investors: we aim to manage our portfolios with a steady focus on fundamentals and an eye on massive long-term growth potential. Investing with Titan is easy, transparent, and effective.
Get started today.
Certain information contained in here has been obtained from third-party sources. While taken from sources believed to be reliable, Titan has not independently verified such information and makes no representations about the accuracy of the information or its appropriateness for a given situation. In addition, this content may include third-party advertisements; Titan has not reviewed such advertisements and does not endorse any advertising content contained therein.
This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any strategy managed by Titan. Any investments referred to, or described are not representative of all investments in strategies managed by Titan, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results.
Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Please see Titan’s Legal Page for additional important information.
You might also like
What Time Does the Stock Market Open and Close?
The global stock market is composed of stock exchanges around the world. Most of them are open to trade Monday through Friday during regular business hours in local time.
When Was The Stock Market Created?
The world’s stock markets serve as a clearinghouse for investors to come together to buy and sell shares, and also serve as a barometer of a society’s fears and hopes.
Dow Jones: Top Highs and Lows Since 1929
Markets tend to rise as the economy expands, the Dow is no exception, although it reflects periods of volatility, is the second-oldest U.S. market index still in use.
What Is a Bull Market? Definition, Overview & Characteristics
A bull market, or a bull run, is an extended period of rising stock prices. A bull market is the inverse of a bear market, which is a downward trending stock market.
© Copyright 2023 Titan Global Capital Management USA LLC. All Rights Reserved.
Please refer to Titan's Program Brochure for important additional information. Certain investments are not suitable for all investors. Before investing, you should consider your investment objectives and any fees charged by Titan. The rate of return on investments can vary widely over time, especially for long term investments. Investment losses are possible, including the potential loss of all amounts invested, including principal. Brokerage services are provided to Titan Clients by Titan Global Technologies LLC and Apex Clearing Corporation, both registered broker-dealers and members of FINRA/SIPC. For more information, visit our disclosures page. You may check the background of these firms by visiting FINRA's BrokerCheck.
Various Registered Investment Company products (“Third Party Funds”) offered by third party fund families and investment companies are made available on the platform. Some of these Third Party Funds are offered through Titan Global Technologies LLC. Other Third Party Funds are offered to advisory clients by Titan. Before investing in such Third Party Funds you should consult the specific supplemental information available for each product. Please refer to Titan's Program Brochure for important additional information. Certain Third Party Funds that are available on Titan’s platform are interval funds. Investments in interval funds are highly speculative and subject to a lack of liquidity that is generally available in other types of investments. Actual investment return and principal value is likely to fluctuate and may depreciate in value when redeemed. Liquidity and distributions are not guaranteed, and are subject to availability at the discretion of the Third Party Fund.
The cash sweep program is made available in coordination with Apex Clearing Corporation through Titan Global Technologies LLC. Please visit www.titan.com/legal for applicable terms and conditions and important disclosures.
Cryptocurrency advisory services are provided by Titan. Cryptocurrency trading is provided by Bakkt Crypto Solutions LLC ("Bakkt Crypto"). Bakkt Crypto is not a registered broker-dealer or a member of SIPC or FINRA. Cryptocurrencies are not securities and are not FDIC or SIPC insured. Bakkt Crypto is licensed to engage in virtual currency business activity by the New York State Department of Financial Services. Cryptocurrency execution services are provided by Bakkt Crypto (NMLS ID 1828849) through a software licensing agreement between Bakkt Crypto and Titan. Please ensure that you fully understand the risks involved before trading: bakkt.com/disclosures.
Information provided by Titan Support is for informational and general educational purposes only and is not investment or financial advice.
Contact Titan at firstname.lastname@example.org. 508 LaGuardia Place NY, NY 10012.