What Is Nasdaq and How Does It Work?

What Is Nasdaq?

Nasdaq—short for National Association of Securities Dealers Automated Quotations—is a U.S.-based stock exchange and the world’s first fully electronic trading platform. Founded in 1971, it revolutionized the way financial markets operated by allowing trades to be executed electronically without a physical trading floor.

Nasdaq vs NYSE: Key Differences

Nasdaq is often compared to the New York Stock Exchange (NYSE), but they differ significantly in structure and focus:

How Does Nasdaq Work?

Nasdaq operates via a fully digital infrastructure. Unlike traditional exchanges, it uses market makers—licensed dealers who continuously quote buy and sell prices. This ensures that liquidity is maintained and trades are executed efficiently.

Core Components:

1. Electronic Order Matching: Orders are matched in real-time without human intervention.
2. Market Makers: Provide continuous liquidity by standing ready to buy or sell.
3. High-Frequency Trading: Enables rapid execution, enhancing market depth.

Which Companies Are Listed on Nasdaq?

Nasdaq is home to many of the world’s leading tech and innovation-driven companies, including:

• Apple (AAPL)
• Microsoft (MSFT)
• Amazon (AMZN)
• NVIDIA (NVDA)
• Meta Platforms (META)

These companies are also part of the Nasdaq-100, an index that tracks the performance of the largest 100 non-financial companies on the exchange.

Advantages of Investing in Nasdaq

1. High Liquidity: Allows for quick buy/sell actions.
2. Transparent Pricing: Prices are updated in real time.
3. Global Accessibility: Investors worldwide can participate.
4. Tech-Driven Opportunities: Exposure to leading innovation sectors.

Key Nasdaq Indexes

Nasdaq hosts a variety of indexes that track different market segments:

• Nasdaq Composite: Includes all stocks listed on Nasdaq.
• Nasdaq-100: Tracks the top 100 largest non-financial firms.
• Nasdaq Biotechnology Index: Focuses on biotech and pharma companies.

How to Invest in Nasdaq

Depending on your location, there are several ways to invest in Nasdaq-listed companies:

1. International Brokerage Accounts: Platforms like Interactive Brokers or TD Ameritrade.
2. ETFs Listed on Local Markets: Nasdaq-tracking ETFs listed on local exchanges.
3. Digital Investment Apps: Platforms like eToro or Revolut allow fractional investing.

Nasdaq Trading Hours

Nasdaq operates on Eastern Time (ET), with extended hours for pre- and post-market trading:

• Regular Trading Hours: 9:30 AM – 4:00 PM (ET)
• Pre-Market: 4:00 AM – 9:30 AM (ET)
• After-Hours: 4:00 PM – 8:00 PM (ET)

Note: Time differences vary depending on daylight saving time.

Final Thoughts: Why Nasdaq Matters

Nasdaq has positioned itself as the global hub for technology and innovation. With its fully electronic model, transparent operations, and focus on high-growth sectors, it offers investors a unique gateway to the future of finance.

Whether you’re a seasoned investor or just starting out, understanding Nasdaq is essential for building a diversified and future-focused portfolio.