Nasdaq Explained

Nasdaq stands for the National Association of Securities Dealers Automated Quotations. It is a global electronic marketplace where buyers and sellers trade stocks using a fully automated system. Launched in 1971, it became the world’s first electronic stock exchange—replacing traditional floor trading with a digital order-matching mechanism.

Nasdaq functions as:

• A stock exchange where companies list their shares
  

• A technology-focused market, hosting many high-growth businesses
  

• A global financial entity that supports trading in stocks, ETFs, ADRs, and derivatives

It is known for its electronic trading infrastructure, which is widely used by many technology-focused and growth-oriented companies.

The Nasdaq began operations in 1971 as the world’s first fully automated trading platform. Initially created to improve over-the-counter (OTC) trading, it soon evolved into a major global exchange.

Key milestones include:

• 1971: Nasdaq launches as the first electronic trading system
  

• 1985: Introduction of the Nasdaq 100 Index
  

• 1990s: Rapid growth fueled by the technology boom
  

• 2000: Reaches peak valuations during the dot-com bubble
  

• 2007: Merges with OMX to form Nasdaq OMX Group
  

• 2010s–2020s: Expands globally and enhances its high-speed electronic infrastructure

Nasdaq’s evolution reflects its continuous innovation in trading technology and global market participation.

Nasdaq operates as a fully electronic exchange where trades are executed via a sophisticated network of computers. It does not have a physical trading floor like the NYSE.

Components of its working model include:

• Market Makers: Financial firms that provide liquidity by offering buy and sell quotes
  

• Electronic Communication Networks (ECNs): Automated systems that match buy and sell orders
  

• Advanced Trading Algorithms: Execute orders at high speed
  

• Listing Requirements: Companies must meet strict financial and governance standards

The system ensures fast execution, tight spreads, and high transparency, making Nasdaq a preferred venue for global investors.

The Nasdaq Composite Index is one of the most widely followed stock market indices. It includes over 3,000 companies listed on the Nasdaq exchange.

Key features:

• It is market-capitalisation weighted, meaning large companies have greater influence.
  

• The index includes technology, biotech, consumer services, healthcare, and financial firms, though tech dominates.
  

• It is used as a benchmark for the performance of the U.S. technology sector and growth stocks.

Movements in the Nasdaq Composite often reflect investor sentiment toward innovation and the future of the digital economy.

Individuals may participate in Nasdaq in multiple ways. Here are the main options:

1. Buying Nasdaq-Listed Shares

Investing in companies such as:

• Apple
  

• Amazon
  

• Nvidia
  

• Tesla
  

• Meta
  

• Microsoft

2. Investing Through ETFs

Popular Nasdaq-tracking ETFs include:

• QQQ (tracks the Nasdaq-100 Index)
  

• ONEQ (tracks the Nasdaq Composite)

3. Investing via Mutual Funds

Some mutual funds mirror the Nasdaq indices or invest heavily in tech-focused companies.

4. Global Market Access Platforms

International brokers allow investors globally to buy Nasdaq stocks through online trading accounts.

Participation typically involves steps such as:

1. Opening a demat/trading account or international brokerage account
   

2. Completing KYC requirements
   

3. Funding the account
   

4. Placing orders for Nasdaq stocks or ETFs

Nasdaq transformed global financial markets by introducing:

• Electronic order execution
  

• Real-time price quotations
  

• High-speed algorithmic trading
  

• Lower trading costs vs traditional floor exchanges

Its innovations improved market efficiency and transparency. As trading became faster and more accessible, Nasdaq helped democratise investing, allowing individuals worldwide to participate in the U.S. stock market.

The Nasdaq 100 is an elite index that includes the 100 largest non-financial companies listed on the Nasdaq exchange. It features leading names across technology, biotech, retail, and communication services.

The index includes:

• Apple
  

• Alphabet
  

• Meta
  

• Tesla
  

• Nvidia
  

• Costco
  

• PepsiCo

The Nasdaq 100 is considered a benchmark for global tech and growth-stock performance.

Nasdaq could offer the following advantages:

• Exposure to Innovation: Home to cutting-edge tech companies
  

• High Growth Potential: Nasdaq-listed companies often lead in revenue and earnings growth
  

• Global Leadership: Firms on Nasdaq shape global digital transformation
  

• Liquidity: High trading volumes ensure smooth buy/sell execution
  

• Diversification: Through indices like Nasdaq Composite and Nasdaq 100

Despite its many advantages, Nasdaq carries certain risks:

• Market Volatility: Tech stocks can fluctuate sharply
  

• Sector Concentration: Heavy dependence on technology companies
  

• Economic Sensitivity: Growth stocks may react strongly to interest rate changes
  

• Valuation Risk: High valuations can magnify losses during downturns

Investors should balance risk with long-term investment goals.

Nasdaq stands as a global leader in technology-driven trading and remains a key marketplace for innovative, growth-focused companies. From its origins as the first electronic exchange to its current role powering global financial markets, Nasdaq continues to shape the future of investing. For those studying global markets, understanding Nasdaq… provides insight into technology-focused exchanges.

This content is for informational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.