Stocks listed on the NASDAQ Stock Market
are traded in an open market, multiple dealer system, with a number
of
market
makers
competing to trade each individual stock. Market
makers work with specific securities with the guarantee that they
will buy or sell a certain number — usually but not always
100, or a round lot — of shares for a quoted price. These
figures are posted electronically for brokers to compare.
A broker, acting on a client’s instructions
to buy or sell a stock, searches the computer screen for the market
maker displaying the best price and gives an order. The market
maker the broker has selected fills the order at the posted price
or finds another buyer or seller to complete the trade.
Prices are posted and matched rapidly, which
means trading occurs more quickly than with the auction-style
specialist system. That’s one reason that the daily volume
on NASDAQ is higher than on traditional exchanges.
The
NASDAQ
Stock Market
has two divisions: the National Market for
companies of all sizes that meet the listing requirements, and
the Small-Cap Market for small, emerging companies. It also has
a reputation as the market of choice for technology companies,
including some of the world’s largest.
Making history
NASDAQ was the first of the electronic, screen-based markets that are becoming the norm around the world, including those in Tokyo and London that have converted from traditional exchanges.
