Summary: What is the NASDAQ?
The NASDAQ Stock Market (more commonly known as the NASDAQ) is the second-largest stock market exchange in the world. The acronym “NASDAQ” stands for the National Association of Securities Dealers Automated Quotations. Originally created in 1971 to offer a new way for investors to trade without being in-person, the NASDAQ now has more than 3,330 companies listed and is one of the most well-known electronic stock market exchanges. In fact, it’s the world’s second largest stock exchange by total securities value.
Why do Companies List on the NASDAQ?
One of the major reasons is that the listing fees on the NASDAQ are significantly lower than other stock markets, with the maximum price set at only $150,000 (versus the New York Stock Exchange (NYSE) being up to $500,000).
Lower fees allows many new, high growth (and often more speculative) companies to get listed, which enables traders to trade these volatile stocks. Interestingly, while the NYSE is still considered a bigger exchange because its market capitalization is significantly higher than the NASDAQ, the NASDAQ has a greater trading volume than any other U.S. exchange – with approximately 1.8 billion trades per day.
How do I Trade on the NASDAQ?
As the NASDAQ is an electronic exchange, trading is done without a trading floor like you always see in Wall Street movies.
While there are many nuances to the way the exchange works behind the scenes, it’s very simple for investors who want to trade stocks on the NASDAQ. Stocks that trade on the NASDAQ are freely available for trading on any major stock-trading platform, just like those that trade on the NYSE.
To trade stocks listed on the exchange, all an investor needs to do is set up a self-directed brokerage account on a platform like Wealthsimple, Questrade, Interactive Brokers (click here for Wealthsimple versus Questrade or click here for Wealthsimple versus Interactive Brokers).
What Can You Buy?
The NASDAQ allows investors to trade shares in several sectors – including capital goods, consumer durables and nondurables, energy, finance, healthcare, public utilities, transportation and technology – with NASDAQ being best known for its well-known tech stocks. Examples of some of the well-known tech stocks include Amazon, Apple, Alphabet and Meta.
To be listed on the NASDAQ, companies must meet the following criteria:
- Share price of at least $1
- The value of outstanding shares must total at least $1.1 million
However, for smaller companies unable to meet that criteria, they can be listed on the NASDAQ Small Caps Market.
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