What is NASDAQ and how it operates?

NASDAQ stands for National Association of Securities Dealers Automated Quotations. It was founded in 1971 to give dealers the ability to post their quotes electronically.

This is the entity that founded NASDAQ as a way to increase the trading in over-the-counter stocks which were not able to meet the requirements to get their stocks listed on larger exchanges such as the New York Stock Exchange (NYSE). These OTC stocks were previously traded over the phone and because information on the stock had to be obtained directly from a dealer who specialized in the stock it was difficult for the public to trade these stocks. The NASDAQ exchange was thus founded in 1971 giving dealers the ability to post their quotes electronically and therefore streamlining the process and opening up the stocks to a much larger audience. This was an instant success. In 1975 NASDAQ came up with its own listing requirements, which helped them separate the large companies from the smaller ones. This helped these companies to be able to compete with the other large companies that were listed on exchanges like the NYSE. Although NYSE is the largest exchange by market capitalization, it’s electronic quote mechanism made NASDAQ the largest exchange by trading volume.