What is The NASDAQ?

Nasdaq was born in 1971 as the United States' first automated exchange system for stock market securities. In other words, the Nasdaq is an electronic stock market that does the same things as the New York Stock Exchange only with an emphasis on technology. Since its inception, Nasdaq has grown in size and is now one of the United States' largest and most competitive stock exchanges.

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• Stocks listed on Nasdaq

There are currently approximately 3200 company stocks listed on the Nasdaq stock exchange, 335 of which are foreign companies. Many of these companies are technology stocks such as information technology and telecommunications firms, however other economic sectors are represented in this exchange including financial services, retail and transportation companies. While technology stocks are not the only stocks listed on this exchange they do form a large part of the companies traded on this exchange.

• Regulation of Nasdaq

The Nasdaq stock exchange is regulated by the Securities Exchange Committee (SEC). The SEC regulation of Nasdaq and other exchanges centers around the following areas:

1. Assisting public investors in having fair access to investing opportunities
2. Ensuring competitive pricing among exchanges through inter-linking of them.
3. The prevention of fraud and stock manipulation.
4. Limiting risk to investors coming about through technological mishaps.

Recently, the regulatory environment has favored individual investors in terms of financial information. In 1996 an SEC ruling allowed greater individual access to financial information previously only made available to financial institutions. This has led to a larger volume and more favorable investing environment to individual investors. What's more, as of 2000 the 1996 ruling was enhanced. In the SEC's 2000 'fair disclosure' ruling required the distribution of sensitive financial information made available to large brokerage firms to be simultaneously available to individual investors.

• The competitiveness of Nasdaq

Nasdaq has become one of the leading U.S. stock exchanges and currently trades a greater volume of electronic shares per day than any other U.S. stock exchange. Due to its technologically savvy positioning, Nasdaq has been able to secure increasing market share over the last decade. It is currently gaining momentum in the exchange of shares listed on the New York Stock Exchange, specifically it traded 14.9% of NYSE shares as of January 2007.and allows for enhanced electronic features in the trading process according to Nasdaq's Chief Economist. It is believed this faster and more efficient trading platforms allows brokerage firms and Inevestment banks to gain an edge in the trading process. In 2006 Nasdaq bought nearly 3.5 million shares of the London Stock Exchange (LXE) and subsequently placed bids to purchase a majority stake in the exchange in 2007.

• The future of Nasdaq

The future of Nasdaq looks promising. It has a strong brand equity that meets the needs of an increasingly technological world and business environment. Recent developments and trends in stocks traded on the Nasdaq point to its future performance. Also, as a major U.S. stock exchange it is a market leader and therefore enjoys the fiscal benefits of economies of scale which will assist in its future competitiveness.

To summarize, the Nasdaq stock exchange is an electronic stock exchange that emerged alongside an increase in the distribution of computer technology. As information systems have developed, the Nasdaq has become more sophisticated and consequently has gained market share making it more competitive. The Nasdaq is poised for increased amounts of trading volume and a greater amount of corporate listings in the future. The Nasdaq is regulated by the Securities and Exchange Commission which is a U.S. government entity and this organization helps level the playing field for smaller investors.

Sources:

1. http://www.nasdaq.com/newsroom/news/pr2006/ne_section06_046.stm
2. http://www.sec.gov/rules/extra/regmark.shtml
3. http://www.nasdaq.com/reference/nasdaq_facts.stm
4. http://invest-faq.com/articles/regul-sec-nasdaq.html
5. http://findarticles.com/p/articles/mi_qa3715/is_200010/ai_n8912892
6. http://www.nasdaq.com/reference/NASDAQ%20Market%20Structure%20Bulletin.pdf