On February 8, 1971, the Nasdaq stock market began operations as the world's first electronic stock market. At first, it was merely a "quotation system" and did not provide a way to perform electronic trades. The Nasdaq Stock Market helped lower the bid-ask spread (the difference between the bid price and the ask price of the stock), but was unpopular among brokers as it reduced their profits.
The NASDAQ Stock Market eventually assumed the majority of major trades that had been executed by the over-the-counter (OTC) system of trading, but there are still many securities traded in this fashion. As late as 1987, the Nasdaq exchange was still commonly referred to as "OTC" in media reports and also in the monthly Stock Guides (stock guides and procedures) issued by Standard & Poor's Corporation.
Over the years, the Nasdaq Stock Market became more of a stock market by adding trade and volume reporting and automated trading systems.
In 1981, Nasdaq traded 37% of the U.S. securities markets' total of 21 billion shares. By 1991, Nasdaq's share had grown to 46%.
In 1998, it was the first stock market in the United States to trade online, using the slogan "the stock market for the next hundred years". The Nasdaq Stock Market attracted many companies during the dot-com bubble.
In 2006, the status of the Nasdaq Stock Market was changed from a stock market to a licensed national securities exchange.
In 2007, Nasdaq merged with OMX, a leading exchange operator in the Nordic countries, expanded its global footprint, and changed its name to the NASDAQ OMX Group.
To qualify for listing on the exchange, a company must be registered with the United States Securities and Exchange Commission (SEC), must have at least three market makers (financial firms that act as brokers or dealers for specific securities) and must meet minimum requirements for assets, capital, public shares, and shareholders.
In February 2011, in the wake of an announced merger of NYSE Euronext with Deutsche Börse, speculation developed that NASDAQ OMX and Intercontinental Exchange (ICE) could mount a counter-bid of their own for NYSE. NASDAQ OMX could be[when?] looking to acquire the American exchange's cash equities business, ICE the derivatives business. At the time, "NYSE Euronext's market value was $9.75 billion. Nasdaq was valued at $5.78 billion, while ICE was valued at $9.45 billion." Late in the month, Nasdaq was reported to be considering asking either ICE or the Chicago Mercantile Exchange to join in what would probably have to be, if it proceeded, an $11-12 billion counterbid.
In December 2005, NASDAQ acquired Instinet for $1.9 billion, retaining the Inet ECN and subsequently selling the agency brokerage business to Silver Lake Partners and Instinet management.
The European Association of Securities Dealers Automatic Quotation System (EASDAQ) was founded as a European equivalent to the Nasdaq Stock Market. It was purchased by NASDAQ in 2001 and became NASDAQ Europe. In 2003, operations were shut down as a result of the burst of the dot-com bubble. In 2007, NASDAQ Europe was revived first as Equiduct, and later that year, it was acquired by Börse Berlin.
The Nasdaq Stock Market averages about 253 trading days per year.
The Nasdaq Stock Market has three different market tiers:
Capital Market (NASDAQ-CM small cap) is an equity market for companies that have relatively small levels of market capitalization. Listing requirements for such "small cap" companies are less stringent than for other Nasdaq markets that list larger companies with significantly higher market capitalization.
Global Market (NASDAQ-GM mid cap) is made up of stocks that represent the Nasdaq Global Market. The Global Market consists of 1,450 stocks that meet Nasdaq's strict financial and liquidity requirements, and corporate governance standards. The Global Market is less exclusive than the Global Select Market.
Global Select Market (NASDAQ-GS large cap) is a market capitalization-weighted index made up of US-based and international stocks that represent the Global Select Market Composite. The Global Select Market consists of 1,200 stocks that meet Nasdaq's strict financial and liquidity requirements and corporate governance standards. The Global Select Market is more exclusive than the Global Market. Every October, the Nasdaq Listing Qualifications Department reviews the Global Market Composite to determine if any of its stocks have become eligible for listing on the Global Select Market.