Warrior Trading Blog

NASDAQ Definition: Day Trading Terminology

NASDAQ

NASDAQ or National Association of Securities Dealers Automated Quotations is an electronic marketplace that allows buying and selling of securities.

Today, this organization also acts as a benchmark index for US technology securities. As an American Securities exchange, it is considered as the second largest marketplace by market-capitalization meaning it trails behind the NYSE.

History of NASDAQ

In 1971, the marketplace was founded by the National Association of Securities Dealers. This new organization began trading on February 1971 becoming an early electronic securities exchange.

Back then, NASDAQ started as a quotation system which did not offer a means for conducting electronic trades.

Despite this, the electronic marketplace lowered its spread finally becoming unpopular among brokerages who made their money from the spread.

After a few years, the organization assumed the mandate of all trades which were executed by an OTC system of trading. By 1987, this marketplace was referred as OTC. Thanks to improved methods of operations, it added trade and volume reporting together with automated trading systems.

As a result, this became a marketplace that implemented electronic trading finally attracting upcoming companies like Microsoft, Apple, Cisco, Dell and Oracle.

In 1992, the securities marketplace merged with London-Stock-Exchange finally creating an intercontinental linkage composed of securities markets.

By 2006, NASD separated from the marketplace allowing it to operate as a national securities marketplace. This was followed by a merger between NASDAQ and OMX, a Scandinavian marketplace group finally changing its name to NASDAQ-OMX. As a result, this new entity became the largest trading company.

Currently headquartered in New York, NASDAQ-OMX operates 26 markets which deal with equities, options, fixed income, derivatives and commodities. NASDAQ-OMX also operates three clearing houses and five central securities depositories all located in US and Europe.

Today, it is regarded as home to companies which span across different sectors like technology, retail, communications, transportation, biotechnology and media among others. Thanks to its innovative electronic system, it allows stocks and other securities to be traded.

Company Qualifications

For any company to qualify for listing, they must first be registered with United States Securities and Exchange-Commission or SEC. Here are the requirements that must be fulfilled:

i.Must have at least three market-makers. This means having three financial-companies that take up the role of brokers.

ii. A company must meet all minimum requirements for capital, assets, shareholders and public shares.

What you need to know is that all quotes are made available via three levels namely:

i. Level 1 displays highest bid and lowest ask quotes.

ii. Level 2 displays every public quote provided by market-makers plus information about dealers. This information is useful to traders and investors who wish to purchase or sell securities.

iii. Level 3 is a select service for market-makers. Helps them to enter quotes and execute their orders.

Trading Hours

All sessions are set at Eastern Time. A pre-market session starts at 4.00 AM and closes at 9.30 AM while a normal trading session starts from 9.30 AM to 4.00 PM. Once it closes, a post-market session is initiated. This starts from 4.00 PM to 8.00 PM.

Final Thoughts

NASDAQ remains a leader not only when it comes to trading technology but also as a marketplace. As such, the organization will continue to improve on trading technology making it easier for traders and investors to purchase, sell and execute orders.