Takeaways
- The NASDAQ is the world’s second-largest stock exchange based on the market capitalization.
- The NASDAQ currently lists over 3,300 companies on its exchange.
- Trading hours for the NASDAQ begin at 9:30 a.m. and end at 4:00 p.m. ET
- The trading day also consists of pre-and post-market trading sessions.
- The NASDAQ was founded over 52 years ago on February 8, 1971.
What is the NASDAQ?
The National Association of Securities Dealers Automated Quotations, or NASDAQ, is the second largest stock exchange in the world by the market capitalization of the stocks listed on the exchange. Created in 1971, the NASDAQ was formed for stock traders to place orders electronically. Electronic trading was new in the 1970s when a large percentage of trading was conducted in person. Electronic trading revolutionized stock trading, and the NASDAQ quickly gained notoriety as one of the fastest-growing stock exchanges in the United States.
Companies from all sectors, including telecommunications, transportation, utilities, healthcare, and technology, list their stock on the NASDAQ. However, the NASDAQ is specifically known for its technology listings. Technology companies have flocked to be listed on the NASDAQ because it is a lower-cost listing option. As a result, earlier-stage companies with high growth potential have found a home on the NASDAQ. However, the more established blue-chip companies that produce a steady stream of income and dividend payments typically list on the New York Stock Exchange (NYSE).
Prestige plays a role in where companies list their stock. Micro, small, and mid-capitalization companies seeking a cost-effective exchange list their stock on the NASDAQ. The difference in listing costs on the NYSE versus the NASDAQ is not financially overwhelming, but it can be a factor in the decision-making process. Most growth companies focused on cash preservation and maintaining stock market listing requirements decide to list on the NASDAQ. In recent years, however, the NYSE has strategically advertised the NYSE as more accessible to earlier-stage companies.
How to Trade On the NASDAQ
The mechanics of how the NASDAQ stock exchange operates can get complicated. But everyday investors can ignore many of the behind-the-scenes technicalities. Investors can find stocks listed on the NASDAQ provided by all major online brokerages.
Smart Money -> Investing Made Easy: 10 Steps to Start Investing in Stocks
To begin trading stocks, you create an online brokerage account, fund your account, research what securities you want to purchase, and place your order. Investing has been one of the best ways to increase your net worth over the last several decades. The rise of companies listed on the NASDAQ has given stock investors and stock traders even more investment options to make money.
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NASDAQ Trading Hours
Extended Trading Hours: Although the NASDAQ is an electronic securities trading platform, the exchange is not open 24 hours a day. Instead, much like the NYSE, the official trading hours for the NASDAQ stock markets begin at 9:30 a.m. ET and end at 4:00 p.m. ET, Monday through Friday. The NASDAQ is closed for trading based on its U.S. stock market holiday schedule (see below). Importantly, the NASDAQ also offers traders pre- and post-market trading sessions.
Extended Trading Hours: There are two sets of extended trading hours, the morning session, and the evening session. For the morning session, according to Nasdaq, pre-market trading hours are from 4:00 a.m. to 9:30 a.m., Eastern Time Zone[1]. The evening session runs from 4:00 p.m. ET to 8:00 p.m. ET. Extended trading sessions often carry more risk than regular trading sessions because there are fewer investors making trades which leads to lower liquidity, and thus stock prices tend to be more volatile.
Smart Tip:
Not all online brokers allow investors to trade during extended trading hours. Check with your online broker to see what trades you are eligible to make.
History of the NASDAQ
The NASDAQ was founded in 1971 and became the world’s second-largest electronic stock market in the world. It was developed by the National Association of Securities Dealers (NASD).
In the early 1970s, the early NASDAQ devices, known as cathode-ray terminals, only displayed the names of stocks, quotes, and market-maker identification numbers. This marked a revolutionary step forward in electronic securities trading and sparked significant growth for the exchange.
The exchange has since invested in its technological capabilities, complying with regulatory mandates in the 1980s to make timely trade reporting. The stock exchange has also made investments to decrease transaction time, providing more liquidity to stockholders.
In 2002, NASDAQ, Inc. became a publicly traded company listing its shares via an initial public offering (IPO) on the NASDAQ stock exchange.
When is the NASDAQ Closed?
Below is a listing of trading holidays for the NASDAQ.
| Holiday | 2024 Dates |
|---|---|
| New Year's Day | January 1, 2024 |
| MLK, Jr. Day | January 15, 2024 |
| Presidents Day | February 19, 2024 |
| Good Friday | March 29, 2024 |
| Memorial Day | May 27, 2024 |
| Juneteenth | June 19, 2024 |
| Independence Day | July 4, 2024 |
| Labor Day | September 2, 2024 |
| Thanksgiving Day | November 28, 2024 |
| Early Close | November 29, 2024 |
| Christmas Day | December 25, 2024 |
Smart Summary
Investing in stocks is one of the fastest ways to grow your wealth. In fact, investing in stock indexes, like the S&P 500, has yielded an annualized return of around 8% over the last several decades [3]. Placing your money in stocks listed on the NASDAQ or NYSE can be a great financial move. Before choosing any investment, make sure you understand how to start investing. Not sure where to start? Check out the Smart Money: Investing for Beginners Guide.
[1] Nasdaq. Trading Hours for the Nasdaq Stock Markets. Last accessed on August 29, 2023.
[2] Nasdaq. 2023 Stock market Holiday Schedule. Last accessed on August 29, 2023.
[3] Official Data. S&P 500 Data. Last accessed on August 29, 2023.
