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If you have seen NASDAQ quotes listed in newspapers and on
television, you may have assumed it was another stock exchange, like NYSE and
AMEX. But the NASDAQ?the National Association of Securities Dealers Automated
Quotations system?is actually a computer network that links NASD members.
NASDAQ dealers are called market makers. They make markets
by agreeing to buy and sell given securities from their own accounts. More than
600 dealers trade more than 15,000 different stock and bond issues over the
NASDAQ. While NASDAQ securities are traded over the counter, not all
over-the-counter securities are listed on the NASDAQ.
The NASDAQ provides brokers and dealers with immediate
information about the quotations of dealers on various securities, along with
the number of shares of each security the dealer is prepared to trade. By
keeping track of the quotations of all of the dealers with positions in a given
security, it is possible to get a sense of what the current market value is for
Developed in 1973, the NASDAQ became the first electronic stock
market, and it now has imitators around the world. The fast and comprehensive
information provided by the NASDAQ serves some of the information role played by
open outcry bidding at exchange auctions, and helps traders better judge the
changing values of OTC securities.
Let's summarize what we have learned.