NASDAQ

The NASDAQ stock exchange is different from the NYSE or any other traditional exchange as it incorporates an electronic trading system. Founded relatively recently in stock exchange terms, the NASDAQ has never had a traditional open outcry trading floor. All trades were instead made via telephone in the exchange's early history. In 1987, after the Black Monday crash of 19 October, the exchange switched to the SOES (Small Order Execution System), allowing traders to buy and sell completely electronically. This eliminated the problem of brokers not answering their phones, whether accidentally or intentionally.

NASDAQ Indices

The NASDAQ Composite index (NASDAQI:COMPX) is the NASDAQ's main stock index. The Composite is an index of all stocks traded on the NASDAQ and is widely used by those involved in the financial markets as an indicator of the general direction of the US markets, particularly in the area of technology.

The NASDAQ 100 index (NASDAQI:NDX) is an index of the 100 largest non-financial, US-based companies listed on the NASDAQ.

Like their transatlantic cousin, the FTSE 100 (FTSE:UKX), the NASDAQ Composite and 100 are capitalisation weighted indices, meaning their constituent stocks have a greater influence on the value of the index the larger their own market cap. A company valued at $100 million would exert a much greater influence on the index value than a company with a market cap of $1 million. This is different from price weighted indices like the Dow Jones Industrial (DOWI:DJI), where the value of one constituent share, rather than the constituent company's entire market cap, is what determines the level of influence over the index.