Nasdaq – A Comprehensive Review – Technologist

The National Association of Securities Dealers launched the NASDAQ in New York City. It happened in 1971. It was established to create the first electronic stock exchange operation. Now, it is expanding its operations outside the stock market. It is doing it to bring technology to finance.

NASDAQ basically started as an OTC (over-the-counter) trading of stocks. This trading used to happen through physical paperwork and phone calls. After that, the modern technology changed it.

In this article, we are going to give you important information about NASDAQ. Some of its major factors will be discussed here. That is because this blog aims to give you a proper understanding of it. Let’s start.

Overview of NASDAQ

The NASDAQ operates as a global electronic stock exchange market. It started out as a NASD subsidiary. The SEC’s encouragement led to the launch of this company. The outcome was the first electronic trading system.

The Nasdaq 100 Index includes the hundred most frequently traded companies on the stock exchange. It includes companies from a number of areas. These areas include manufacturing, technology, etc. The index does not include financial firms such as commercial and investment banks.

Understanding NASDAQ Index

To be qualified for the Nasdaq 100, index shares can only be listed on the stock exchange market. They comprise American depositary receipts and tracking stocks. The rule is that they should be non-financial. Also, they need to have been trading on an exchange for at least three months. This company’s liquidity standards demand that each security have at least 200,000 shares traded each day on average. There is no minimum market capitalization.

The Nasdaq 100 Index is built using a modified capitalization technique, with specific weights assigned to included items based on their market capitalization. Weighting reduces the power of the larger corporations while balancing the index across all members. This incorporates examining the index’s composition every quarter and modifying the weights if the distribution standards are not satisfied.

Concept Rebalancing

On July 17, 2023, this business performed a unique rebalancing of the Nasdaq 100 index. Rebalancing the component company weights addressed index concentration and lessened dependence on a select group of large businesses. Nasdaq standards state that an index has to be rebalanced if stocks with a weight in the index of more than 4.5% account for more than 48% of the index.

This corporate has only carried out a special rebalancing twice previously, in 1998 and 2011. The last special rebalancing was sparked by a recent surge in tech stocks and Tesla shares, which increased the aggregate weight of the top five firms (Microsoft, Apple, Nvidia, Amazon, and Tesla) above the 48% mark. The special rebalancing decreased their weights while increasing those of other corporations such as Alphabet, Meta Platforms, Netflix, and Costco.

The unusual rebalancing will have an influence on the index’s and individual companies’ performance and volatility, as some investors may modify their portfolios to reflect the new weightings. However, this is likely to be transient because the rebalancing has no effect on the fundamentals or prospects of any of the index’s firms.

Investment Criteria

The Nasdaq 100 index measures the top 100 firms by adjusted market capitalization that trade on their platforms. Therefore, investors cannot invest directly in it. Still, there are a few practical approaches. They may be utilized to get index exposure without having to buy individual index firms.

What Type of Market Tiers and Stocks are Featured on NASDAQ?

Companies listed on the NASDAQ are divided into three market capitalization tiers.

• Capital Market
• Global Market
• Global Select Markets

The capital market is a market for equities with lower market capitalizations and less onerous listing criteria.

The Global Market and Global Select Markets contain mid-cap and large-cap companies, respectively, and are subject to stringent corporate governance and liquidity rules. Among the most valuable corporations are Amazon, Alphabet (Google), and so on. The stock has to complete some requirements before getting listed.

Difference between the Nasdaq 100 and the S&P 500:

Both of them are stock market indices. They measure the performance of top corporations. Both represent market performance. The Nasdaq has 100 firms and the other one has 500. The difference is more than that.

Conclusion

NASDAQ has become the home for over 100 companies. Now, it’s America’s biggest stock exchange marketplace. It incorporates hundreds of firms and companies under its umbrella. We have discussed some of its most important factors in the information given above. They can help you understand its nature fully. So, make sure to read them out carefully.

FAQs.