Legal Definitions - NASDAQ

NASDAQ stands for the National Association of Securities Dealers Automated Quotation System.

NASDAQ is a prominent global electronic marketplace where investors can buy and sell company stocks and other securities. Unlike traditional stock exchanges that once relied on physical trading floors, NASDAQ operates entirely through computer networks and telecommunications. It is particularly known for listing many technology, biotechnology, and internet-based companies, and it is one of the largest stock exchanges in the world by market capitalization.

• Example 1: Company Listing

  A rapidly growing artificial intelligence startup, after years of private funding, decides to "go public" to raise more capital and allow early investors to sell their shares. Given its focus on innovative technology, the company chooses to list its stock on NASDAQ.

  This illustrates NASDAQ's role as a primary venue for companies, especially those in the tech sector, to offer their shares to the public for the first time through an Initial Public Offering (IPO). Once listed, their shares can be traded by investors on the NASDAQ exchange.

• Example 2: Investor Trading

  An individual investor, using their online brokerage account, decides to purchase shares of a well-known streaming service provider. When they place the order, their broker executes the trade on the NASDAQ exchange, where the streaming company's stock is listed.

  This demonstrates NASDAQ's function as the actual trading platform. The investor isn't buying directly from the company but from another investor, with NASDAQ facilitating the electronic matching of buy and sell orders, ensuring a fair and efficient transaction.

• Example 3: Market Performance Indicator

  Financial news reports often discuss the performance of the "NASDAQ Composite Index" to indicate the health of the technology sector. If the NASDAQ Composite is up significantly, it suggests that tech stocks, in general, are performing well, influencing broader market sentiment.

  This highlights NASDAQ's broader economic significance. Beyond being a place to trade, the collective performance of the companies listed on NASDAQ (represented by its indices) serves as a key barometer for specific industries, particularly technology and growth-oriented companies, influencing investor sentiment and economic analysis.