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What Is the Nasdaq?

The Nasdaq is the world’s second-largest stock and securities exchange. It’s heavily geared toward tech-based and growth stocks, though it lists companies of all sizes from around the world. 

🤔 Understanding the Nasdaq

The Nasdaq began life as the National Association of Securities Dealers Automated Quotations in 1971. Originally, the organization’s purpose was providing automated stock price information for investors to use in making trading decisions. But in 2006, the Nasdaq officially separated from its parent company (which would later merge with FINRA) and reformed as a national securities exchange. 

As an exchange, Nasdaq holds several claims to fame. Instead of a physical trading floor, it was the first to institute an all-electronic trading model using an automated computer network. The tech-savvy lister was also the first to launch a website and sell its tech to other exchanges. Moreover, it runs all trades through dealers known as market makers instead of direct auctions. 

Then, in 2008, the Nasdaq merged with the Scandinavian exchange group OMX. The newly formed Nasdaq, Inc. offered exchange-traded funds (ETFs), debt and structured products, derivatives and commodities in addition to stocks. 

Since then, the Nasdaq has grown into an enormous exchange with a bent toward tech, growth and blue-chip stocks. Because the exchange attracts growing industries, its stocks tend to be more volatile when compared to the NYSE. Still, companies that want to list must meet some basic criteria, including:

  • Registering with the SEC
  • Adhering to financial and corporate governance requirements
  • And having at least three market makers

What this means for you

The primary idea behind the Nasdaq exchange was to provide an efficient, screen-based securities market. But when it comes to actually trading securities, the Nasdaq operates similarly to the NYSE. 

How to Invest in the Nasdaq

To access Nasdaq-listed securities, regular investors have to go through a broker or intermediary—like Q.ai’s investing platform—to facilitate the transaction. The intermediary relates your buy or sell orders to the exchange to make your trade. 

But the Nasdaq isn’t open 24/7. Generally, the market is open Monday-Friday from 9:30 a.m. to 4:00 p.m. Eastern Time. But the Nasdaq does offer premarket trading hours from 4:00 a.m. to 9:30 a.m. and after-market hours from 4:00 p.m. to 8:00 p.m. The exchange also closes for most federal holidays, as well as the Friday after Thanksgiving and Christmas Eve. 

As the second-largest stock exchange in the world, the Nasdaq plays a vital role in the trading game by:

  • Making markets efficient
  • Serving as an alternative to the NYSE for U.S.- and international-based companies
  • Bringing a wide range of tech, growth and blue-chip stocks to investors

But even if you don’t invest through the exchange, investors of all stripes rely on the Nasdaq. Without their technological innovations and automatic trading systems, investing would be a slower, more complex process than it is today. 

Disclosures

Q.ai is the trade name of Quantalytics Holdings, LLC. Q.ai, LLC is a wholly-owned subsidiary of Quantalytics Holdings, LLC ("Quantalytics"). Quantalytics offers automated financial advice tools through Quantalytics Investment Advisors, LLC ("QAI"), an SEC-registered investment advisor. QIA’s investment advisory services are ONLY available only to residents of the United States. Disclosures concerning QIA’s investment advisory services are available on its Form ADV filed with the SEC. The content in this newsletter is for informational purposes only and does not constitute a comprehensive description of Q.ai's investment advisory services.

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