Legal Definitions - National Association of Securities Dealers Automated

National Association of Securities Dealers Automated Quotation system (NASDAQ)

The NASDAQ is an electronic global marketplace where buyers and sellers can trade securities, primarily stocks. It functions as a sophisticated computer network that facilitates the buying and selling of shares in companies, providing real-time price information and executing trades without the need for a traditional physical trading floor.

Here are some examples illustrating the NASDAQ:

• Example 1: A Startup's Public Debut

  A rapidly growing software company, "InnovateTech Inc.," decides to offer its shares to the public for the first time to raise capital. Instead of listing on an exchange with a physical trading floor, InnovateTech chooses to list its stock on the NASDAQ. This means that when investors want to buy or sell shares of InnovateTech, their transactions will be processed electronically through the NASDAQ system, and the company's stock price will be displayed and updated in real-time on the NASDAQ exchange.

  This example demonstrates NASDAQ as the electronic platform where companies like InnovateTech can list their shares for public trading, making them accessible to investors globally through a computerized system.

• Example 2: An Investor's Stock Purchase

  Sarah, an individual investor, wants to buy shares in "GreenEnergy Solutions," a renewable energy company known for its innovative solar panel technology. She uses her online brokerage account to place an order. Her brokerage firm routes her buy order to the NASDAQ, where it is matched with a seller's order for GreenEnergy Solutions shares at the prevailing market price. The transaction is completed electronically within seconds, and Sarah now owns shares listed on the NASDAQ.

  This illustrates how NASDAQ serves as the automated system that facilitates the actual buying and selling of securities for individual investors, providing the infrastructure for efficient and rapid trade execution.

• Example 3: Market Performance Reporting

  During an evening news broadcast, the financial reporter states, "The NASDAQ Composite Index closed up 1.5% today, driven by strong performance in technology and biotechnology stocks." This refers to an index that tracks the performance of all common stocks and similar securities listed on the NASDAQ stock market.

  This example highlights NASDAQ's role as a major stock market whose overall performance is tracked and reported, reflecting the collective activity and value of the numerous companies that choose to list their shares on its electronic exchange.