The US is known as the world’s financial capital. Its two biggest share markets by market cap are the New York Stock Exchange (NYSE) and the Nasdaq. Let’s zoom in and take a closer look at what is the Nasdaq, the history of the Nasdaq,  how the Nasdaq works, the Nasdaq Index, and the difference between the NYSE and Nasdaq. 

What is the Nasdaq?

A share market or stock market, is an exchange or marketplace where people buy and sell shares, or stocks, of publicly listed companies. The Nasdaq is one of 13 share markets in the US, and one of 60 around the globe. 

The Nasdaq is also a publicly-owned company, the Nasdaq OMX, and you can invest in it through Hatch under the ticker NDAQ. Yep, the Nasdaq trades shares of itself on its very own exchange - how very meta! Nasdaq OMX operates 29 markets, and its tech is used globally by more than 130 organisations.

What is the history of the Nasdaq?

A pioneer of electronic exchanges, the Nasdaq began trading on 8 February 1971 and unlike the world’s largest share market, the NYSE, has been entirely electronic from day one. Launching as a room filled with wall-to-wall computers - the Nasdaq broke the mould by providing fast, transparent trading from the beginning. 

The Nasdaq was the first to support Big Tech, offering cheaper listing fees than the NYSE, and was first to offer dual-listings. The Nasdaq exchange also credits itself with inventing the modern IPO. And because the exchange trail-blazed a computerised trading system from inception, it has become the trading model standard for other electronic share markets across the world.

What Nasdaq stands for

Nasdaq is the acronym for National Association of Securities Dealers Automated Quotations, which was founded by the National Association of Securities Dealers (NASD), today known as the Financial Industry Regulatory Authority (FINRA). The NASD was created to regulate the OTC Markets (Over-the-Counter securities), which were not traded on stock exchanges like the NYSE. 

The NASD group believed that share markets that existed at the time were inefficient and slow. So they launched a new exchange to disrupt the status quo. With innovative computer automation speeding up trading times for investors, they were able to avoid any unnecessary delays caused by more manual processes.

Are Nasdaq and NYSE the same?

The Nasdaq and NYSE are not the same. At around 50 years young, the Nasdaq is in its infancy compared to the NYSE with its long, colourful history, which dates back to 1792 making it over 200 years old!

New kid on the block, the Nasdaq is well-regarded for its highly valued tech stocks. With age comes wisdom, among other things, and the NYSE has built a reputation of prestige. Its legacy has been earned by offering a broad variety of stocks in what have historically been considered ‘stable’ growth stocks, including established Blue Chip companies. 

The NYSE and Nasdaq are the world’s two largest stock exchanges. In June 2024, measured by total market cap of the companies listed on each exchange, the NYSE was the largest, with a market cap of around US$35 trillion, and the Nasdaq the second-largest, valued at nearly US$29 trillion. 

The total value of the companies listed on both the NYSE and Nasdaq is higher than the next ten largest exchanges combined, which includes China’s Shanghai, Shenzhen and Hong Kong Stock Exchanges!

Read more about the NYSE: New York Stock Exchange

Where is the Nasdaq located?

Because the Nasdaq has always operated electronically, it doesn’t have the NYSE’s bustling trading floor and infamous opening bell used to signal the start of each trading day. Instead, the Nasdaq has made its presence known by taking a high profile spot on New York's Times Square with its eight-storey high, outdoor round LED display called MarketSite - a staple of any RomCom NYC meet cute! 

Rather than showing a rolling display of ticker symbols, each company’s stock is represented by their logo on the large screen, which is made up of more than 8,000 panels. The interior of MarketSite, which opened in 2000 and was 10 years in the making, is a broadcast studio featuring a wall of 96 monitors displaying updated information about Nasdaq trading activity.

How many companies are on the Nasdaq?

The Nasdaq is the world’s second-largest share market by securities value, listing more than 3,000 US and global companies on its exchange. This compares to the NYSE’s listings of around 2,300 companies. 

The Nasdaq lists large numbers of Silicon Valley companies - some of the world’s biggest companies by market cap - which chose to go public on the Nasdaq because of its technology focus. Big Tech stocks accounted for around 44% of the exchange’s total value in June 2024, mainly due to five of the world’s largest companies, Microsoft, Apple, Nvidia, Alphabet (Google) and Amazon.

Other tech stocks listed on the exchange are Adobe, Meta, Intel, Cisco, Amgen, Atlassian, CrowdStrike, Airbnb, Netflix, eBay, Zoom, AMD, Paypal, Marvell Technology and more! Any investors wanting to understand how the tech sector is performing in the share markets as a whole, need only look at the Nasdaq and its Nasdaq Index, which we dive into below.

But the Nasdaq isn’t just for tech. It also has among its listed companies consumer retailers, healthcare, utilities, food and transport. This includes familiar names like Tesla, Lululemon, AstraZeneca, Starbucks, American Airlines, Costco, PepsiCo, Monster Beverage, Marriott, Walgreens Boots Alliance, Warner Bros. Discovery and T-Mobile.

The Nasdaq is the most active exchange in the US by volume with an average daily trading volume (ADTV) of around 1.8 billion shares.

How does the Nasdaq work?

The Nasdaq is known as a dealers’ market. This means instead of brokers buying and selling shares directly from each other, or in-person specialists as they’re called at the NYSE, they go through a market maker. Market makers are catalysts that smooth out the trading process to help investors buy and sell shares, which typically, historically, has increased the overall investment activity.

Nasdaq opening and closing

The Nasdaq opens every weekday, Monday to Friday at 9.30am Eastern time, closing at 4pm. Like the NYSE, the Nasdaq is closed a full day on nine major US holidays, including Juneteenth, Memorial Day and Thanksgiving. The Nasdaq also observes New Year’s Day on the Monday following if it falls on a Sunday, and it opens some partial days, closing early at 1 or 2pm. 

At Hatch, we don’t leave you marking days on your calendar; we let you know when holidays are coming up and any additional hours the share markets may be closed.

What is the Nasdaq Index?

The Nasdaq Index - also called the Nasdaq Composite Index - includes 3,000+ US and international company stocks that are listed on the Nasdaq exchange. That number represents the entire Nasdaq, not just a handful of the largest companies' stocks (some companies are dual-class and list both Class A and Class B shares). While the volume of stocks listed on the Nasdaq is large, its top performing company stocks - the so-called ‘magnificent seven’ which includes Amazon (AMZN), Alphabet (GOOGL, GOOG), Apple (AAPL), Microsoft (MSFT), Meta (META), Nvidia (NVDA) and Tesla (TSLA) - account for around 51% of the Nasdaq 100 Index's (^NDX) overall performance.

You can invest in the Fidelity Nasdaq Composite Index ETF (ONEQ) through Hatch, which closely corresponds to the performance of the Nasdaq Index.

The Nasdaq Composite Index contains: 

• Common stocks - that represents an investor’s share ownership of a company
• ADRs - that enable investors to invest in global companies that are not listed on the US share markets (read all about ADRs here)
• REITs - Real Estate Investment Trusts finance, own or operate real estate, from retail, warehousing to office blocks and apartments
• Shares of limited partnerships - a silent partner or investor of a company. AGNC is an example of a limited partnership.

The Nasdaq Index does not contain:

• ETFs (exchange traded funds) - that are a group of companies listed as one stock
• Companies listed on any other market such as the NYSE 

Given the Nasdaq’s many tech company listings, the Nasdaq Index can be used by the finance industry and investors as a litmus of tech sector investor sentiment, and it’s often referenced by media and industry commentators alongside the Dow Jones Industrial Average and the S&P 500 to gauge overall market performance. 

What is the Nasdaq-100?

The Nasdaq-100 Index (or Nasdaq-1000 if you type in too many zeros in Google!) contains 100 of the biggest companies by market cap that are listed on the Nasdaq stock exchange, excluding financial companies that instead list on the Nasdaq Financial-100. It includes companies in the wide range of sectors and stocks that list on the Nasdaq, from pharmaceutical, to tech, telcos and transport. 

On Hatch, both the Invesco QQQ Trust Series 1 (QQQ) and the Invesco Nasdaq 100 ETF (QQQM) track the performance of the Nasdaq-100 Index and aim to provide returns that correspond to the Index. To understand the difference between QQQ and QQQM, here’s a breakdown.

With Hatch, you can access both the NYSE and Nasdaq and invest in stocks on either or both. Understanding how each share market works may help you decide what stocks are best for your investment goals, and investing across both share markets can be another way to diversify your portfolio.

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