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The NASDAQ (National Association of Securities Dealers Automated Quotation) Stock Market, founded in 1971, was the world’s first electronic stock market. The purpose of it’s founding was to popularize the OTC (over-the-counter) securities market which, up to that point, had been relatively unknown and unused by many stock players. With its first day of trading on February 8, 1971, the NASDAQ system displayed quotes for over 2,500 over-the-counter stocks.
By 1975, the NASDAQ displayed only NASDAQ-listed stocks, separating itself from other OTC stocks. Five years later the NASDAQ began displaying inside quotations, which showed the market’s best bid and best sell prices on screen. This basically kept the market makers honest, and published spreads (margin between the best bid and best sell) declined on more than 85% of NASDAQ stocks.
From 1982 - 1986, the NASDAQ’s top companies broke away from the smaller ones, forming the NASDAQ National Market. This new market offered traders real-time quotes on stocks, and also offered margin to traders, meaning they could now purchase these stocks on credit with their brokers.
As the NASDAQ moved into the next decade, it was beginning to become competition to the NYSE (New York Stock Exchange). In 1992, the NASDAQ National Market was allowed to trade in the early morning hours before the U.S. stock markets generally opened. This allowed these stocks to be traded while the European markets were open. And in 1994, the NASDAQ made history by surpassing the NYSE in annual share volume.
Continuing to keep market makers in check, as they did in 1980, the SEC (Securities and Exchange Commission) allowed the NASDAQ to quote stocks in 1/16ths of a dollar (or .0625 cents) for any stock that traded above $10. This reduced the spread between the bid and the sell prices by 40%.
Finally, in 1998, the NASDAQ merged with the American Stock Exchange (AMEX) to form the
NASDAQ-AMEX Market Group.
The NASDAQ stock market is full of technology stocks of up-and-coming companies - some with expensive stock prices and some for just pennies. It continues to be America’s most popular market in a day and age when technology still seems to be the wave of the future.
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