What is the Nasdaq?

National Association of Securities Dealers Automated Quotations, or Nasdaq, is the world’s first electronic stock exchange that lists over 4000 companies.¹

The Nasdaq Exchange and Nasdaq Composite

The Nasdaq was the first exchange to provide electronic quotations along with a digital trading platform. This revolutionized the stock markets and improved the trading experience. Due to its tech-savvy approach, many companies in the technology sector were drawn towards the Nasdaq for filing IPOs. The exchange continues to be inclined towards tech companies, although there are companies from other sectors like Consumer Services, Healthcare, and Finance.

The Nasdaq Composite is an index that tracks the performance of the stocks present in the Nasdaq index. Technology stocks command the highest weight (51.31%), followed by Consumer Discretionary (20.50%) and Healthcare (8.57%).² It is an index based where the weight of each stock is based on its market capitalization. Technology stocks like Apple, Microsoft, Facebook, and Amazon have the highest weight in the index.³ The Nasdaq Composite is a great way to understand the price movements of the technology sector. The Composite also serves as a benchmark for mutual funds heavily invested in the tech space.

Example

One of the biggest tech companies listed in the Nasdaq exchange was Facebook (now called Meta). The IPO launched in 2012, and the listing day had its share of misfortunes. Due to a technical glitch in Nasdaq, orders in the stock could not be executed. The exchange paid a $10 million fine for failing to provide a seamless trading experience.⁴ Meta continues to be one of the top 10 stocks in the Nasdaq Composite.²

References

1. Nasdaq. https://www.nasdaq.com/about

2. Nasdaq Composite. https://indexes.nasdaqomx.com/docs/FS_COMP.pdf

3. "What Is the Nasdaq Composite Index?" Fool. https://www.fool.com/investing/stock-market/indexes/nasdaq/

4. “SEC Charges NASDAQ for Failures During Facebook IPO.” SEC. https://www.sec.gov/news/press-release/2013-2013-95htm

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