What is NASDAQ?

The NASDAQ is an American stock exchange based in New York City. NASDAQ, which was originally an acronym for National Association of Securities Dealers Automated Quotations, is the second-largest stock exchange in the United States, in terms of the value of its securities, trailing only the New York Stock Exchange (NYSE). Many of the world's largest technology companies appear on the NASDAQ, including Amazon, Apple, Cisco, eBay, Google, Intel, Microsoft, and Sun.

The NASDAQ was born in 1971, and the stock exchange now contains about 3,200 publicly traded companies. A stock exchange is a place where people can buy and sell shares of stock in a publicly owned company. The stock exchange helps the buyer and seller settle on a price, charging a fee for its service.

The NASDAQ is different from the NYSE, because its stock trading is — and always has been — done completely electronically. For nearly its first two decades, stock trading on the NASDAQ occurred over a computer bulletin board system and over telephone. Now, however, trading on the NASDAQ occurs using automated trading systems, with full reports on trades and on daily trading volumes.

While the NYSE has the well-known Dow Jones Industrial Average as its primary index, the NASDAQ offers the NASDAQ 100 as its primary index. This consists of 100 of the largest companies in market value that trade on the NASDAQ. Companies in the NASDAQ 100 include companies from a variety of market sectors, other than financial service companies, which are included in their own index. Each year, companies can be added and removed from the NASDAQ 100, depending on their ranking in market value. An index is a collection of stocks, ranging from a few dozen companies to several thousand, that are combined to deliver a snapshot of the performance of the whole market.

Each publicly traded company may only allow its shares to be traded on one stock exchange. When a company initially begins offering stock to the public, it selects a stock exchange on which to trade. Occasionally, a company will move from one stock exchange to another.

When viewing the performance of stocks on a stock ticker, you'll see stocks traded on the NASDAQ using a four-letter abbreviation, with only a few exceptions. Stocks traded on the NYSE use a three-, two-, or one-letter abbreviation. When viewing stock performances on a financial news TV channel or in a newspaper, you'll see NASDAQ and NYSE stocks listed side by side.

The NASDAQ's standard buying and selling session is from 9:30 a.m. to 4 p.m. Eastern time on most weekdays, excluding a few holidays. Pre-market and post-market trading sessions allow for buying and selling outside of standard market hours.