How NASDAQ Works – A Guide for Beginners

If you are interested in investing in the stock market, you have probably heard of the Nasdaq. But what exactly is the Nasdaq and how does it work? In this blog post, we will explain the basics of the Nasdaq, its history, how it differs from other stock exchanges, and why it is important for investors.

What is the Nasdaq?

The Nasdaq stands for the National Association of Securities Dealers Automated Quotations. It is the second-largest stock exchange in the world by market capitalization, after the New York Stock Exchange (NYSE). The Nasdaq lists more than 2,500 companies, mostly from the technology, biotechnology, and consumer sectors. Some of the most well-known companies listed on the Nasdaq include Apple, Microsoft, Amazon, Facebook, and Tesla.

What is the history of the Nasdaq?

The Nasdaq was founded in 1971 by the National Association of Securities Dealers (NASD), now known as the Financial Industry Regulatory Authority (FINRA). The Nasdaq was launched after the Securities and Exchange Commission (SEC) urged NASD to automate the market for securities not listed on an exchange. The result was the world’s first electronic stock market. The Nasdaq started as a platform for providing automated quotes, but soon evolved into a full-fledged trading system. The Nasdaq separated from NASD and became a national securities exchange in 2006. In 2008, it merged with the Scandinavian exchange group OMX to form the Nasdaq OMX Group. In 2015, it changed its name to Nasdaq Inc.

How does the Nasdaq work?

The Nasdaq is a dealer market, which means that buyers and sellers trade with a market maker, who is a broker-dealer that quotes both a buy and a sell price for a stock. The market maker acts as an intermediary and makes money from the difference between the bid and ask prices, also known as the spread. The Nasdaq has hundreds of market makers who compete with each other to offer the best prices and liquidity for traders.

Unlike an auction market like the NYSE, where buyers and sellers trade with each other through a broker, the Nasdaq does not have a central location or a specialist who matches orders. Instead, all trades are executed electronically through a network of computers. The Nasdaq uses a matching engine, which is a computer that connects buyers and sellers when their prices match. The matching engine also determines the opening and closing prices of stocks based on supply and demand.

The Nasdaq also provides real-time price quotes and data to investors, brokers, news organizations, and other market participants. The Nasdaq has several indices that track the performance of different segments of the market, such as the Nasdaq Composite, which includes all the stocks listed on the exchange, and the Nasdaq 100, which includes the top 100 non-financial stocks.

Why is the Nasdaq important?

The Nasdaq is important for investors because it offers access to some of the most innovative and influential companies in the world. The Nasdaq is known for its high-growth potential, as many of its listed companies are leaders in emerging technologies and industries. The Nasdaq also reflects the trends and sentiments of the broader market, especially in relation to technology and consumer behavior.

The Nasdaq is also important for companies because it offers them a platform to raise capital, increase their visibility, and attract investors. The Nasdaq has lower listing requirements than the NYSE, which makes it easier for smaller or newer companies to go public. The Nasdaq also offers various services and benefits to its listed companies, such as marketing support, investor relations, corporate governance, and compliance.


The Nasdaq is one of the most prominent and influential stock exchanges in the world. It is a dealer market that facilitates electronic trading of stocks through market makers. It lists more than 2,500 companies from various sectors, with a focus on technology and innovation. It provides real-time price quotes and data to investors and other market participants. It also offers various indices that track the performance of different segments of the market.

If you want to learn more about how the Nasdaq works, you can visit its official website at