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NASDAQ Stock Exchange
As the world's largest electronic stock market, NASDAQ®
is not limited to one central trading location. Rather, trading is
executed through NASDAQ's sophisticated computer and telecommunications
network, which transmits real-time quote and trade data to more than 1.3
million users in 83 countries. Without size limitations or geographical
boundaries, NASDAQ's "open architecture" market structure allows a
virtually unlimited number of participants to trade in a company's
stock.
Today,
NASDAQ lists the securities of nearly 4,100 of the world's
leading companies and each year, continues to help hundreds of companies
successfully make the transition to public ownership.
Trading on NASDAQ is not limited to any fixed number
of participants. This allows a large number of firms with widely
different business models and trading technologies to connect to the
NASDAQ network and compete on an equal basis. Rather than forcing
investors to go through a single financial firm to buy or sell stocks,
NASDAQ links up a variety of competitors and lets participants choose
with whom they are going to trade. All firms trading
NASDAQ stocks must
be certified with the Securities and Exchange Commission (SEC) and
registered with NASDAQ and NASD Regulation®. Following are examples of
the kinds of firms trading NASDAQ stocks:
- Market Makers
Key to NASDAQ's market structure are a core group of financial firms
called market makers. More than 500 market making firms trade on
NASDAQ, acting as distributors for NASDAQ-listed securities. Also
known as dealers, market makers are unique in that they commit their
own capital to NASDAQ-listed securities � then turn around and
re-distribute the stock as needed. They are required at all times to
post their bid and ask prices in the NASDAQ network where they can
be viewed and accessed by all participants. By being willing to buy
or sell stock using their own funds, market makers add liquidity to
NASDAQ's market, ensure that there are always buyers and sellers for
NASDAQ-listed securities, and enable trades to be filled quickly and
efficiently.
- ECNs
In addition to market makers, the NASDAQ network also connects
alternative trading systems into the market, such as electronic
communication networks (ECNs). ECNs provide electronic facilities
that investors can use to trade directly with each other. As NASDAQ
market participants, ECNs display either one-sided or two-sided
quotes that reflect actual orders. Additionally, they provide
investors with an anonymous way to enter orders into the
marketplace. Unlike market makers, ECNs operate simply as
order-matching mechanisms and do not maintain inventories of their
own.
- Order-Entry Firms
Order-entry firms are also NASDAQ market participants. Order-entry
firms enter and execute orders through NASDAQ on behalf of retail
and institutional customers and other broker/dealers, but they do
not maintain buy or sell price quotations in NASDAQ-listed
securities. Like ECNs, order-entry firms do not commit capital to
stocks, but they do increase the competition among market
participants � helping to keep stock prices competitive and adding
to the market's liquidity.
Through its unique framework of multiple market participants, NASDAQ
provides listed companies' securities with ready access to investors,
visibility in the marketplace, and market conditions that promote
immediate and continuous trading:
- Liquidity
Liquidity is best defined as the ease with which stocks can be
bought and sold in the market. By encouraging trading among a
virtually unlimited number of market participants, NASDAQ offers an
environment that facilitates greater liquidity.
- Depth of Market
Depth of market refers to the total amount of money market makers
have invested in a single security and is related to the number of
market participants trading in the security. However, even a few
market participants can provide abundant depth of market by
committing to buy or sell large quantities of a security. Knowing
there is depth of market can reassure investors of a stock's
marketability, especially during periods of heavy trading volume.
- Transparency
Transparency, the ability to view investors' buy and sell orders at
different price levels, is crucial to the decision-making process in
securities trading. NASDAQ's open market structure offers a level of
transparency not found on other major U.S. markets. On NASDAQ, all
bid and ask quotations in a given security are broadcast over the
network. All NASDAQ market participants � regardless of whether they
are professional traders � can see the same information.
- Price Efficiency
In securities trading, as in most industries, competition is one of
the most important factors in creating price efficiencies. The
aggressive competition for orders fostered among NASDAQ's market
participants helps to ensure that investors receive the best prices
for the securities they trade.
NASDAQ is building the world's first truly global
stock market � digital and Internet-accessible, open to anyone anywhere
in the world, 24 hours a day. NASDAQ has already broken new ground in
Europe, Hong Kong, and Canada , with additional plans for Asia, Latin
America, and the Middle East. By reaching out around the globe, NASDAQ
is creating new links to additional capital and an even broader pool of
investors.
For Instant Access,
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Just one winning trade
could pay for your membership for years to come!
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"Options Trading Systems" |
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