Nasdaq & Nasdaq 100 Index

 What Is Nasdaq?

Nasdaq may be a global electronic marketplace for purchasing and selling securities. Nasdaq was created by the National Association of Securities Dealers (NASD), which is now referred to as the Financial Industry regulatory agency (FINRA). The marketplace was created so that investors could trade securities on a computerized, speedy, and transparent system, and it commenced operations on February 8, 1971.

 

 

Understanding Nasdaq

Nasdaq is an acronym for "National Association of Securities Dealers Automated Quotations." The term, “Nasdaq” is additionally wont to ask the Nasdaq Composite, an index of quite 3,000 stocks listed on the Nasdaq exchange that has the world’s foremost technology and biotech giants like Apple, Google, Microsoft, Oracle, Amazon, and Intel.

Nasdaq officially separated from the NASD and commenced to work as a national securities exchange in 2006. In 2007, it combined with the Scandinavian exchange group OMX to become the Nasdaq OMX Group, which is that the largest exchange company globally, powering one in 10 of the world’s securities transactions.

Headquartered in NY, Nasdaq OMX operates 25 markets—primarily equities and also including options, fixed income, derivatives, and commodities—as well together clearinghouse, and five central securities depositories within us and Europe. Its cutting-edge trading technology is employed by 90 exchanges in 50 countries. it's listed on the Nasdaq under the symbol NDAQ and has been a part of the S&P 500 since 2008.


The Nasdaq Trading Platform

The Nasdaq computerized trading system was initially devised as an alternative to the inefficient “specialist” system, which had been the prevalent model for nearly a century. The rapid evolution of technology has made Nasdaq’s electronic trading model the quality for markets worldwide.

As a pacesetter in trading technology from the outset, it had been only fitting that the world’s technology giants chose to list on the Nasdaq in their youth. because the technology sector grew in prominence within the 1980s and 1990s, the Nasdaq became the foremost widely followed proxy for this sector.

The technology and dot-com boom and bust of the late 1990s are exemplified by the increase and fall of the Nasdaq Composite—an index that ought to not be confused with the Nasdaq trading platform. consistent with the company Finance Institute, the index crossed the 1,000-mark for the primary time in July 1995, soared within the following years, and peaked at over 5,000 in March 2000. It then slumped almost 80% by October 2002 within the subsequent correction.


KEY TAKEAWAYS

  • Nasdaq may be a global electronic marketplace for purchasing and trading securities. it had been the world's first electronic exchange. Most of the world's technology giants, including Apple and Facebook, are listed on the Nasdaq.
  • It operates 25 markets, one clearinghouse, and five central securities depositories within us and Europe.
  • The Nasdaq also lists popular cryptocurrencies.




Recent History of Nasdaq

The European Association of Securities Dealers Automatic Quotation System (EASDAQ) was founded as an EU like the Nasdaq stock exchange. it had been purchased by NASDAQ in 2001 and has become NASDAQ Europe. Operations were pack up, however, as a result of the bursting of the dot-com bubble. In 2007, NASDAQ Europe was revived as Equiduct, and it's currently operating under Börse Berlin.

On June 18, 2012, Nasdaq OMX became a founding member of the United Nations Sustainable Stock Exchanges initiative on the eve of the United Nations Conference on Sustainable Development. In November 2016, Nasdaq Chief Operating Officer Adena Friedman was promoted to the role of CEO, becoming the primary woman to run a serious exchange within us. In 2016, Nasdaq earned $272 million in listings-related revenues.

Nasdaq achieved a record close on Aug. 29, 2018, when its index peaked at 8,109.69 after the tech-heavy index was battered by the 2008-09 financial crisis and therefore the ensuing Great Recession. The Nasdaq composite index closed above 14,000 for the primary time in May 2021, a replacement record high at the time.

Nasdaq 100 Index

The Nasdaq 100 Index may be a basket of the 100 largest, most actively traded U.S companies listed on the Nasdaq stock market. The index includes companies from various industries apart from the financial industry, like commercial and investment banks. These non-financial sectors include retail, biotechnology, industrial, technology, health care, et al..

Weighting the Index

The index is made on a modified capitalization methodology. This modified method uses individual weights of included items consistent with their market capitalization. Weighting allows constraints to limit the influence of the most important companies and balance the index with all members. To accomplish this, Nasdaq reviews the composition of the index each quarter and adjusts weightings if the distribution requirements aren't met.

Trading the Nasdaq 100 Index

The Nasdaq 100 is traded through the Invesco QQQ Trust. This product is meant to trace the performance of the 100 largest companies on the Nasdaq exchange. Each company within the trust must be a member of the Nasdaq 100 and be listed on the broader exchange for a minimum of two years. Also, listed stocks got to have a mean daily trading volume of 200,000 and publicly report earnings quarterly and annually.

Some exceptions are made for newly public companies that have extremely high market capitalizations. Companies with bankruptcy issues are omitted from the Invesco QQQ Trust. once in a while, the composition of the trust might not identically match the Index, but the most objective of the QQQ remains to trace the worth and performance of the underlying index.

Composition of the Nasdaq 100 Index

The Nasdaq 100 Index consists of assets in various sectors, excluding financial services. an outsized portion of the index covers the technology sector, which accounts for 54% of the index's weight. the subsequent largest sector is consumer services, represented by companies like restaurant chains, retailers, and travel services. These stocks account for nearly 1 / 4 of the cap weight because of the continued growth of retail giant Amazon (AMZN). Rounding out the index is healthcare, industrials, and telecommunications. the range of companies included within the Nasdaq 100 helped drive strong returns for the past 20 years.

Criteria for Eligibility

For inclusion within the Nasdaq 100, index securities must be listed exclusively on a Nasdaq exchange. this will include common stocks, American depositary receipts (ADRs), and tracking stocks. Twenty-seven countries are tied to companies represented within the index. Other grounds for inclusion comprise market capitalization and liquidity. While there's no minimum requirement for market capitalization, the index itself represents the highest 100 largest companies listed on the Nasdaq.


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