National Association of Securities Dealers Automated Quotations NASDAQ Stock Exchange

by Investing School on February 16, 2011

The term “NASDAQ” refers to an American stock exchange. The letters in “NASDAQ” once officially represented the words “National Association of Securities Dealers Automated Quotations,” but the exchange has now officially stated that this acronym is no longer in effect. The NASDAQ is the biggest United States market with electronic screen-based equity securities, covering more than 3,700 corporations and companies. The NASDAQ has the highest amount of trading of any stock exchange worldwide.

The NASDAQ stock exchange originally opened for trading in February of 1971 as the first electronic stock market in the world. At first, the NASDAQ was not involved in any connection between buyers and sellers. Initially the market was also not popular with brokers because the NASDAQ narrowed the spread, but brokers used the spread to make much of their profit.

In order for a company to qualify to list on the NASDAQ exchange, it needs to be officially registered with the SEC. The company must also have at least three firms that act as brokers or dealers for specific securities, as well as meeting the NASDAQ’s minimum requirements for total assets, available capital, public shares, and shareholders.

There are three levels of available NASDAQ quotes. The first level, Level 1, demonstrates the highest bid and lowest offer – or the inside quote. Level 2 shows the public quotes and information about market makers who express a desire to sell/buy stock, as well as recently completed orders. The final level, Level 3, is used by the market makers themselves. This level allows them to enter their quotes and execute orders.

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