The NASDAQ Acronym, Explained

By Stock Research Pro • April 23rd, 2011

NASDAQ is an acronym that stands for the National Association of Securities Dealers and Automated Quotations. The NASDAQ was created in 1968 and is now the largest electronic stock market in the world, executing hundreds of millions of stock transactions every trading day. The NASDAQ has established itself as the exchange that lists smaller and emerging companies that would not otherwise gain access to capital markets. As of January 2011, the NASDAQ lists almost 3,000 companies, many of which are high-tech companies and the NASDAQ itself is a for-profit company that is publicly traded on the NASDAQ under they symbol NDAQ.



How Does the NASDAQ Operate?


The NASDAQ is a dealer’s market, meaning the participants are buying and selling through a dealer known as a “market maker”, rather than buying and selling from one another. The NASDAQ operates through a computerized system that established stock prices and facilities exchange. Unlike the New York Stock Exchange (NYSE) the NASDAQ does not have a trading floor but instead relies on brokers to leverage the computer system to find the best price for the stock under consideration and complete the transaction. Other methods for facilitating a NASDAQ transaction can include the telephone or teleptype.

What are the NASDAQ Listing Requirements?


Like the other major stock exchanges, NASDAQ companies must meet a set of listing requirements. To maintain its reputation, the NASDAQ will not list just any company for trading and requires listed companies to demonstrate a performance history, a solid management team, and financial stability. Some of the listing requirements for the NASDAQ include (at the time of listing):

  • A minimum of 1,250,000 publicly-traded shares (excluding those shares held by company ownership)

  • A minimum bid price of five dollars

  • A minimum of 45 round lot shareholders, at least 2,200 shareholders in total or at least 550 total shareholders with average trading volume in the past year of at least 1.1 million

  • A minimum of three market makers for the stock

  • Strict adherence to NASDAQ corporate governance rules

    • In addition, NASDAQ clearly establishes rules regarding earnings, cash flow, market capitalization, and more. Once listed, the company must maintain these standards or face the possibility of being delisted.

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    The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax advisor.

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