NASDAQ Stock Exchange

Everything is relative, and from the standpoint of stock exchanges, the NASDAQ is a newcomer. When trading began in February 1971, the NASDAQ became the world's first completely electronic stock exchange. Today, it is arguably the largest of the US stock markets.

NASDAQ Stock Market

The NASDAQ Stock Market consists of around 2,700 listed companies, and it now has surpassed even the New York Stock Exchange in terms of shares traded daily.  With its high-tech image, the NASDAQ is home to many prestigious retailers, media, communication, financial institutions, and biotechnology companies.  The total market capitalization of the exchange was $3.5 trillion in September 2011.

As is the case with the Dow Jones, the NASDAQ is also home to several important Indices:  the NASDAQ 100 Index and the NASDAQ Composite Index.

NASDAQ 100 Index

Launched in January 1985, the NASDAQ 100 consists of 100 of the largest non-financial companies listed on the NASDAQ Stock Market in terms of total market capitalization.  The index represents companies across all major industry groups, including computer hardware, retailers, computer software, telecommunications, and biotechnology.

As composed, the NASDAQ 100 is expected to maintain the economic attributes of capitalization-weighting, while providing the investor with diversification.  To meet this objective, the components and weightings of the index are reviewed quarterly.

NASDAQ Composite Index

Launched in 1971, the NASDAQ Composite Index is perhaps the broadest based index available today.  For example, the Index includes over 3,000 securities, more than most of the other major stock market indices. As was the case with the NASDAQ 100, the NASDAQ Composite is calculated using a market capitalization weighted methodology.

To be included in the Composite, the company must be listed exclusively on the NASDAQ Stock Market, and have a security type of either:

• Common Stock
• Ordinary Shares
• Tracking Stocks
• Limited Partnership Interests 
• Shares of Beneficial Interest (SBIs)
• Real Estate Investment Trusts (REITs), or
• American Depositary Receipts (ADRs)

Security excluded from the Index include closed-end funds, convertible debentures, exchange traded funds, preferred stocks, rights, warrants, units, and other derivative securities.

NASDAQ Computer Infrastructure

When first assembled in 1971, the NASDAQ computer infrastructure consisted primarily of mainframe computers.  As the exchange grew, so did the demands on this infrastructure, and the first wave of change started in 1982.  In that year, NASDAQ started using HP NonStop servers for core applications.

The demands on their infrastructure are astounding; to say the least.  Today, their vast computer network handles roughly 1.8 billion real time messages every trading day and approximately 25,000 trades per second. 

In March 2005, NASDAQ extended their relationship with HP by purchasing over 500 new processors to improve the exchange's display and trading execution system over a three year period.  On June 30, 2006 the NASDAQ had its largest trading day ever, as 3.5 billion shares were exchanged.

Boston Stock Exchange Acquisition

First announced in October 2007, the NASDAQ agreed to acquire the Boston Stock Exchange for $61 million.  The acquisition included the BSE Group, as well as the Boston Equities Exchange.  On August 29, 2008, the NASDAQ OMX Group completed the transaction.

NASDAQ MarketSite

In step with its high tech image, the NASDAQ houses a state-of-the-art digital studio that transmits live market information to over 175 networks including CNBC, BBC, Bloomberg, and Reuters.  Through this network, millions of viewers are able to keep in touch with the latest market developments.

NASDAQ MarketSite Video Wall

Located in the heart of Times Square, the NASDAQ MarketSite Video Wall is a modern day icon for the electronic market itself.  The video wall consists of 96 multimedia screens and measures 47 feet long and 16 feet high.

The wall provides market summaries, charts and graphs, intraday updates, and information on Indices.  Quite frankly, it's the place to be for reporters covering the latest in stock market moves.

NASDAQ Holiday Trading Schedule

The following are the holiday schedules for the NASDAQ in the calendar years 2011 and 2012.

NASDAQ 2012 Holiday Schedule

The NASDAQ will close early at 1:00 p.m. on Tuesday, July 3, 2012, Friday, November 23, 2012, and Monday, December 24, 2012.

NASDAQ 2011 Holiday Schedule

New Years' Day (January 1, 2011) falls on a Saturday.  The rules of the exchange state that when a holiday falls on a Saturday, the preceding Friday is observed, unless the Friday is the end of a monthly or annual accounting period.  Friday, December 31, 2010 is the end of both a monthly and annual accounting period.  The exchanges will be open that day as well as the following Monday.

NASDAQ Trading Hours

The NASDAQ trading sessions are between the hours of 9:30 a.m. to 4:00 p.m. Eastern Time.  NASDAQ After Hours runs from 4:00 p.m. to 6:30 p.m. Eastern Time.  The timetable for trading is as follows:

NASDAQ Hours of Operation

The operating hours listed above are stated as Eastern Standard Time (EST) = GMT-5 / Eastern Daylight Time (EDT) = GMT-4.

NASDAQ Composite Records

No article on the NASDAQ would be complete without a rundown of the historical highs and records set on the exchange.  In the table below, you will see one trend that stands out from all the rest, and that is the effect of the dot com run up and the bubble bursting in the years 1999 and 2000.  We'll finish up this article with a quick mention of the dot com bubble since it has a lasting effect on the NASDAQ Composite Index.

NASDAQ Composite Index Records

The above data tell you that it took over 24 years for the Composite to hit the 1,000 mark, yet it only took just a little bit over 4 months for the NASDAQ Composite to rise from 2,000 to the 3,000 mark.  That's an average of a 150% increase in the market valuation for over 3,000 stocks in just 4 months!

NASDAQ Bubble

Only fifteen years ago (1995), the Internet had an estimated 18 million users, and its commercial value was just being recognized.  The "Internet economy" was all the rage, and speculators poured money into companies that had yet to show any profits.

In fact, not only didn't most of these companies show any earnings, most didn't even have a viable business plan.  One of the standout examples is Pets.com, which despite its lack of profitability, the company managed to reach a market capitalization of over a billion dollars in its IPO.

In early 2000, investors began to realize the dot com was a bubble ready to burst, and panic selling ensued.  The stocks of hundreds of dot com companies disappeared overnight, as the NASDAQ Composite lost over 78% of its value over the next two and a half years.  The market fell from a record high 5,132.52 in March of 2000 to 1,108.49 in October 2002.

 About the Author - NASDAQ Stock Exchange

Copyright © 2005 - 2011 Money-Zine.com