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NASDAQ & Securities Market

This research provides an overview of NASDAQ, the National Association of Securities Dealers Automated Quotations System. This overview is presented in three discussions. The history of NASDAQ is covered in the initial discussion. The role of NASDAQ in the broader securities market is addressed in the second discussion, and the advantages and disadvantages associated with the NASDAQ operation are enumerated in the final discussion.

In 1971, the National Association of Securities Dealers (NASD) placed the organization's automatic quotations system into operation (Sharpe, 1993, p. 53). The NASDAQ is a nationwide communication network that provides securities brokers with instant information on the terms of sale being offered by all major securities dealers that are a part of the system.

There are three levels of activity in NASDAQ (Sharpe, 1993, p. 54). Level I is used by individual account executives to obtain up-to-the-minute market information. Representative bid and ask prices are available for each security listed by the NASD. The representative bid price is the median of current bid prices in the NASDAQ system, while the representative ask price is the representative bid price added to the median bidask spread of current quotes on a security.

Level II is used by securities dealers to display on terminals in trading rooms the current quotations on any security listed by NASD (Sharpe, 1994, p. 54). Level III activity permits a securities dealer to enter into the NASDAQ system bid and ask prices for any security for which they are in a position to make a market. The entry of bid and ask prices through Level III activity is predicated on an assumption that securities dealers entering such prices into the NASDAQ system are prepared to execute such trades for a minimum of one normal unit of trading which typically is 100 shares.

At the time a bid or ask price is entered into the NASDAQ system, the price is reco...

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NASDAQ & Securities Market. (1969, December 31). In LotsofEssays.com. Retrieved 02:24, March 29, 2024, from https://www.lotsofessays.com/viewpaper/1681682.html