Understanding NASDAQ and its Stock Quotes

The NASDAQ market had a tough start as the first electronic stock market, but today it reigns supreme as the largest stock market by volume in the world. NASDAQ is an acronym for National Association of Securities Dealers Automated Quotation System. In the very beginning, it started out as just a bulletin board system that did not do the market making of matching buyers with sellers. The idea behind the first NASDAQ bulletin board was to eliminate large spreads on stock. Though this was popular with traders, but unsurprisingly, brokerages were slow to accept NASDAQ as a serious offering, as its low spreads reduced the profit margin for stock brokers.

Humble Beginnings for the Biggest Market

Even up until 1987, the NASDAQ marketplace received very little attention and was referred to as the OTC market, or over the counter. The crash of 1987, the NASDAQ index and its marketing as a market for the common investor helped NASDAQ to become a better recognized stock market. The birth of electronic trading and day trading from home helped NASDAQ to become the largest stock market in the world. Quick executions and lower spreads than traditional marketplaces helped it gain credibility with individual investors and eventually the institutional investor.

Different Quoting on NASDAQ Markets

NASDAQ quotes are different from other exchanges because they operate on tiers. Level 1 is the broadest quote level and shows the highest bid and lowest offer price. Level 2 gives a bit more information by showing the stock quotes of market makers and which market makers are willing and wanting to bull or sell stock. Level 3 is the best quoting and is generally given to market makers and high volume individual traders; it allows traders to enter their own quotes and execute orders from other traders.

The NASDAQ has been synonymous with technology stocks since its inception. Even today, the NASDAQ composite index is considered to be heavily weighted toward technology and science related fields. Thus when the internet bubble hit through 2000-2002, the NASDAQ index was at the top of performance charts, reaching as high as 4900 during the peak. Just a few years later, the house of cards collapsed, and the NASDAQ composite had fallen to a low of 1200. As the world markets fell, the NASDAQ led the way in the critical fall out of many tech and startup dot com stocks.

The Electronic Market Has Grown

Today, the NASDAQ is much better suited as an index and has since diversified its offerings to include stocks from all over the world.  The NASDAQ has even integrated itself with other world markets to offer dually exchanged stocks. The company behind the NASDAQ market has since bought out several other smaller markets, including the Phillidelphia stock exchange, which has been in existence since 1790. The NASDAQ OMX Group, the owner of the NASDAQ market, trades it own stock on its own market. It has holdings in many different stock exchanges including: eight stock markets in Europe and a third stake in the Dubai Stock Exchange. Though it had humble beginnings, the NASDAQ continues to grow into a financial services powerhouse.