What is the Full Form of NASDAQ?

The full form of NASDAQ is the National Association of Securities Dealers Automated Quotation. The NASDAQ is the electronic marketplace at the global level for the buying and selling of securities through the automated network founded by NASD, i.e., the National Association of Securities Dealers (NASD) in 1971. It is also the benchmark index of the U.S. technology stocks.

History

  • NASDAQ was founded in 1971 by NASD (National Association of Security Dealers). It began its operations on 8th February 1971. Initially, it acted as a quotation system and did not offer any guidance regarding performing electronic trades. The brokers highly discouraged the National Association of Securities Dealers Automated Quotations stock market since it lowered the bid-ask spreadBid-ask SpreadThe asking price is the lowest price at which a prospective seller will sell the security. The bid price, on the other hand, is the highest price a prospective buyer is willing to pay for a security, and the bid-ask spread is the difference between them.read more and impacted their profits significantly.The NASDAQ stock exchange was referred to as the OTCOTCOver the counter (OTC) is the process of stock trading for the companies that don’t hold a place on formal exchange listings. The broker-dealer network facilitates such decentralized trading of derivatives, equity and debt instruments.read more or over-the-trading counter system until 1987. Soon after, the NASDAQ stock market recognized a stock market as it started to add trade and facilitated automatic trading systems. In 1998, NASDAQ was the first and only stock market in the U.S. that traded online.The National Association of Securities Dealers Automated Quotations stock market collaborated with the London Stock Exchange in 1992 to develop the first inter-continental association of capital markets. NASDAQ, in 2005, acquired Instinet and paid $1.9 billion for the same. In 2016, The National Association of Securities Dealers Automated Quotations earned $272 million as listings revenues.

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How Does it Work?

National Association of Securities Dealers Automated Quotation is the electronic marketplace at a global level for the buying and selling of securities through the automated network. In the NASDAQ case, different market makersMarket MakersMarket makers are the financial institution and investment banks which ensures enough amount of liquidity in the market by maintaining enough trading volume in the market so that trading can be done without any problem.read more compete to buy and sell the stocks they represent as per their choice. Each market maker uses its research techniques, capital, and system resources to represent any stock and compete for customer orders by displaying the quotation of buy price and sell price on the electronic exchange. After receiving the orders, market makers either purchase or sell the stock as the case may be out of their inventories immediately or seek out another side of trades so that one can execute the same as quickly as possible.

Requirements

The following are the main listing requirements for the National Association of Securities Dealers Automated Quotation:

  • Each listing company must have a minimum of 1,250,000 shares that can be publicly traded shares. This number does not include shares with the company’s directors, officers, or any beneficial owners with more than 10% of company shares.The regular bid price must be $4.00 at the listing time, along with at least three of the market makers for stock. However, this bid priceBid PriceBid Price is the highest amount that a buyer quotes against the “ask price” (quoted by a seller) to buy particular security, stock, or any financial instrument. read more can be reduced to $3.00 or $2.00, as the case may meet varying requirements.Over 12 past months, the companies must have at least 2,200 total shareholders, 450 round lot shareholders, or 550 total shareholders having 1.1 million of the average trading volume.Every company has to follow certain required corporate governance rulesCorporate Governance RulesCorporate governance is a set of rules or practices through which an entity is directed and controlled to increase shareholders wealth by increasing the economic value and is concerned about its relations with various entity stakeholders.read more of the NASDAQ.

The company must meet at least one of the following standards by meeting all the criteria listed in addition to the above requirements:

  • Earnings: At least aggregate pre-tax incomePre-tax IncomePretax income is a company’s net earnings calculated after deducting all the expenses, including cash expenses like salary expense, interest expense, and non-cash expenses like depreciation and other charges from the total revenue generated before deducting the income tax expense.read more of $11 million in the past three years, $2.2 million in the past two years, and no net loss in any of the past three years.Capitalization with Cash Flow: At least an aggregate minimum cash flow of $27.5 million in the past three fiscal years and no negative cash flowCash FlowCash Flow is the amount of cash or cash equivalent generated & consumed by a Company over a given period. It proves to be a prerequisite for analyzing the business’s strength, profitability, & scope for betterment. read more during any of those years. Also, At least $550 million average market capitalization of a companyMarket Capitalization Of A CompanyMarket capitalization is the market value of a company’s outstanding shares. It is computed as the product of the total number of outstanding shares and the price of each share.read more over the past 12 months and revenues of a minimum of $110 million in a previous fiscal year.Capitalization with Revenue: The second standard can be removed if average market capitalization is of at least $850 million during the previous 12 months, with revenues of a minimum of $ 90 million in a previous fiscal yearFiscal YearFiscal Year (FY) is referred to as a period lasting for twelve months and is used for budgeting, account keeping and all the other financial reporting for industries. Some of the most commonly used Fiscal Years by businesses all over the world are: 1st January to 31st December, 1st April to 31st March, 1st July to 30th June and 1st October to 30th Septemberread more.Assets With Equity: Second and third standards can be removed if average market capitalization is of at least $ 160 million during previous along with total assets of at least $ 80 million and stockholders’ equity of at least $ 55 million.

NASDAQ Trading Hours

The National Association of Securities Dealers Automated Quotation’s trading hours are divided into pre-market trading hours, normal trading hours, and after-hours trading. The timings of the different phases are as follows:

  • Normal Trading Hours: The normal trading hours of the NASDAQ begins at 9:30 a.m. and end at 4 p.m. Eastern Standard Time (local time).Pre-Market Trading Hours: The pre-market trading hours of the NASDAQ begin at 4 a.m. and ends at 9:30 a.m. Eastern Standard Time, after which the normal trading hours begin.After-Hours Trading: After the normal trading hours, the after-hours trading in the NASDAQ extends from 4 p.m. to 8 p.m. Eastern Standard Time.

The National Association of Securities Dealers Automated Quotation trading is open from Monday to Friday. However, the same remains closed on the weekends (Saturday and Sunday) and the listed market holidays.

Conclusion

NASDAQ is used for the National Association of Securities Dealers Automated Quotation. As the name implies, It is the stock exchange in America founded in 1971. It is also the benchmark index of U.S. technology stocks. To get listed on NASDAQ, companies have to follow various listing requirements. In addition, one can trade at the NASDAQ during its trading hours only.

This article has been a guide to the Full Form of NASDAQ, i.e. (National Association of Securities Dealers Automated Quotation), and its meaning. Here, we discuss how NASDAQ works with its history, requirements, and trading hours. You may refer to the following articles to learn more about finance: –

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