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 the securities through the automated network, which was founded by NASD, i.e., National Association of Securities Dealers (NASD) in the year 1971, and it is also the benchmark index of the U.S. technology stocks.
- NASDAQ was founded in the year 1971 by NASD (National Association of Security Dealers). They begin its operations on 8th February 1971. Initially, they acted as a quotation system, and it did not offer any guidance regarding performing electronic trades. The National Association of Securities Dealers Automated Quotations stock market was highly discouraged by the brokers 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. and impacted their profits to a significant extent.
- NASDAQ stock exchange was referred to as 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. or over the trading counter system until the year 1987. Soon after, the NASDAQ stock market recognized a stock market as it started to add trade and facilitated automatic trading systems. In the year 1998, NASDAQ was the very first and the 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 the year 2005, acquired Instinet and paid 1.9 billion dollars towards the same. In 2016, The National Association of Securities Dealers Automated Quotations earned 272 million dollars as revenues from listings.
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 the 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. compete with each other for buying and selling the stocks they represent as per their choice. Each market maker uses their research techniques, capital, and system resources in order to represent any stock and compete for the orders from the customers 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 own inventories immediately or seek out another side of trades so that the same can be executed as fast as possible.
The following are the main sets of listing requirements for the National Association of Securities Dealers Automated Quotation.
- Each company for the purpose of listing must have a minimum of 1,250,000 shares that can be publicly traded shares. This number does not include the share with the company’s directors, its officers, or any of the beneficial owners with more than 10% shares of the company.
- 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. can be reduced to $ 3.00 or $ 2.00, as the case may be on meeting varying requirements.
- Over the period of 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. of the NASDAQ.
In order to get listed in addition to the above requirements, the company must meet with at least one of the following standards by meeting all the criteria of that standard.
- 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. of $ 11 million in the past three years, of $ 2.2 million in the past two years, and no net loss in any of the year in the past three years.
- Capitalization with Cash Flow: At least aggregate minimum cash flow of $ 27.5 million in the past three fiscal years and no negative amount of 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. during any of those years. Also, At least $ 550 million average market capitalization of a company over the past 12 months and revenues of a minimum $ 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 year.
- 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 trading hours of the National Association of Securities Dealers Automated Quotation are divided into three phases that are 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 ends 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. till 8 p.m. Eastern Standard Time.
The National Association of Securities Dealers Automated Quotation trading is open from Monday to Friday. The same remains closed on the weekends (Saturday and Sunday) and on the listed market holidays.
NASDAQ is used for the National Association of Securities Dealers Automated Quotation. As the name implies, It is the stock exchange in America that was founded in the year 1971. It is also the benchmark index of U.S. technology stocks. To get listed at NASDAQ, companies have to follow various listing requirements. One can trade at the NASDAQ during its trading hours only.
This has been a guide to the Full Form of NASDAQ, i.e. (National Association of Securities Dealers Automated Quotation), and it’s meaning. Here we discuss how does NASDAQ work with its history, requirements, and trading hours. You may refer to the following articles to learn more about finance –