NASDAQ Stock Exchange

NASDAQ Stock Exchange

NASDAQ

It is not strange today to hear the news talk about the stock market. However, it is usually strange to a lot of people to hear economic terms used by the business news anchors when they talk about the stock market. In these modern times, a day doesn’t pass without bumping into something that touches on investing or the stock market. Therefore, the term stock market is actually familiar to a lot of people. The big question is ‘Do you understand how the stock market works? Do you know what a stock exchange is?’

What is the NASDAQ?

First, let us clear the air, NASDAQ is not a space station. In fact, its concerns are very far from dealing with space issues. It is a stock exchange located in New York and it is second largest after the NYSE. A stock exchange is a regulated market where shares of securities are sold and bought. In this case, a security is a financial instrument which can be purchased and sold in stock market. Example of securities include:

1) Stocks

When you buy stocks, it means you have ownership in that particular publicly traded company. Each stock represents a fraction of ownership; therefore, the more shares you have the larger the ownership you have. There are different classes of shares:

– Common stocks

If you buy common stocks, then you will have the privilege of voting on issues of composition of the board of the company and the corporate policies of the corporation. One thing that you have to always remember before buying this type of shares, is that, in case of liquidation, common stock holders are usually not given any payment. Therefore, you should consider this risk before purchasing common stocks.

– Preferred stocks

If you buy this kind of shares, you will only have ownership rights but will not have the privilege to vote on issues affecting the corporation. However, this type of stock is advantageous because dividends are usually paid to preferred stock holders before the common stock holders. In the case of convertible preferred shares, you can convert them to common shares of that particular corporation.

2) Bonds;

When you buy bond, it means that the government or a corporation owes you. There are 2 main types of bonds:

– Corporate bond
– Government bond

If you buy bonds you are set to receive interest payments at a regular interval. The interest is known as a ‘coupon’ and are normally paid until that particular bond matures. You should also be aware that if you own bonds you are usually given priority over the shareholders.

3) Options;

When you buy options, you are granted the rights to buy or sell an asset. This means that you can buy or sell the underlying asset at a given price and on a given date.

What are biggest companies on the NASDAQ?

NASDAQ started operations in 1971 as the first stock market which operated electronically. The electronic trading attracted big companies to the NASDAQ.

First, you should understand that different companies have different market capitalization. The companies with the largest market capitalization are the largest companies on NASDAQ. Market capitalization is the number of outstanding shares by the current share price. Here are the top 5 biggest companies on the NASDAQ in terms of market capitalization

Apple;-It launched its IPO on December 1989 and each share was $22 and the IPO generated the highest capital ever since the IPO of General Motors which was released back in 1959.
Google; – It launched its IPO on December 2004 and each share traded at $85
Microsoft; – It launched its IPO on March 1986 and each share traded at $21
Amazon; – It launched its IPO on May 1997 and each share traded at $18 and later closed at $23
Facebook; – Its IPO was launched recently in 2012 and each share traded at $38

What is special about NASDAQ?

Throughout its development, NASDAQ has been special in a lot of ways. First, it had unique kind of infrastructure which allowed it to trade electronically. At first, it only offered electronic quotation but the trades were not electronic. However, it was later able to trade shares of the listed corporations online.

Another special aspect of the NASDAQ stock exchange is its ability to extend its activities to other continents. You have probably heard of globalization and NASDAQ is the epitome of internationalization. This is because it was the first American stock exchange to form an intercontinental linkage of the stock market. In fact, this linkage with London Stock Exchange was the first of its kind in the whole world. It also extended its operations to Europe by purchasing EASDAQ in 2001.

The best thing about the NASDAQ is that it appointed a woman by the name Adena Friedman as the CEO. She was the first woman to head a major stock exchange in the United States.

Conclusion

The information above gives you an idea of what a stock exchange is and gives you an insight into the nature and operations of the NASDAQ. Therefore, if you are willing to invest in the stock market, you are equipped with the basic tools that will allow you to make sound decisions. You should keep in mind that investing in the stock exchange has its own risks and rewards; therefore, you should do enough research on the companies you wish to invest in. Good luck!

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