Nasdaq, Inc.

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The headquarters of the Nasdaq Stock Exchange in Times Square, New York City, November 2018.

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Nasdaq, Inc. is an American company that owns and operates multiple securities exchanges in the United States—including the Nasdaq Stock Market, four U.S. options exchanges, and several equity markets—as well as venues in Canada, the Nordic countries, and the Baltics. Headquartered in New York and regulated by the Securities and Exchange Commission (SEC), it’s one of the largest stock exchanges in the U.S. by trading volume.

The name Nasdaq is an acronym for National Association of Securities Dealers Automated Quotations, a nod to the system’s original purpose—replacing phone calls with computerized price quotes. Over time the brand has grown to encompass not just the exchange itself, but also major indexes such as the Nasdaq Composite and Nasdaq-100, and a reputation as the premier listing venue for technology and high-growth companies.

Nasdaq revolutionized financial markets by leading the transition from centuries-old open outcry trading in exchanges to fully electronic trading systems. What began as a computerized quotation system in the early 1970s evolved within a few decades into the global standard for electronic trading.

Nasdaq was launched on February 8, 1971. Its mission was specific: to automate the opaque and often fragmented market for over-the-counter (OTC) securities, most of which were not listed on any of the major U.S. stock exchanges. 

Nasdaq was not yet a registered “national securities exchange”—that status came with an SEC action in January 2006—but rather an electronic quotation system run by the National Association of Securities Dealers (NASD). It displayed prices for OTC securities on screen, while trades were still arranged by phone, and its rules and governance were set by the NASD.

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Nextel President CEO Timothy M. Donahue (left), former Nasdaq chair Gordon Macklin (center), and Nasdaq chair and CEO Frank Zarb at a press conference in Reston, Virginia in March 2000.

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Nasdaq’s early stage was shaped by Gordon Macklin, who led from its 1971 founding and served as its first president from 1975 to 1987. Credited as the “father of Nasdaq,” Macklin guided the exchange’s formative years, transitioning it from an electronic quote display to a credible and competitive marketplace.

Before Nasdaq, OTC shares were traded solely over the phone, whereas trading at other major stock exchanges was conducted on a trading floor. Lacking a centralized data and communications hub, OTC pricing was slow and inconsistent, often varying from dealer to dealer. By automating price quotes on an electronic screen through a centralized computer network, Nasdaq brought structure, speed, and transparency to the OTC market.

In its early stages, however, Nasdaq was only a quote display system. It provided price information but did not execute trades, which still had to be arranged by phone. Even so, it marked a clear step forward by standardizing the flow of information and delivering it faster and more transparently than the decentralized system it replaced.

Nasdaq’s reputation as a hub for technology start-ups began early. Intel (INTC) set the tone with its initial public offering (IPO) in October 1971, becoming one of Nasdaq’s first high-profile listings.

In the years that followed, other emerging tech heavyweights—notably Apple (AAPL) and Microsoft (MSFT)—joined Nasdaq and cemented its reputation as the preferred listing venue for technology and growth companies.

Some tech companies were drawn to Nasdaq’s growing reputation within the Silicon Valley start-up culture. But arguably, the decision to list with Nasdaq in its early years was likely more practical than symbolic: Nasdaq’s listing requirements were looser than those of New York Stock Exchange (NYSE) or American Stock Exchange (AMEX), making it more suitable for start-up companies, many of which were at the forefront of the emerging digital computer era. Like many of the tech firms it listed, Nasdaq entered the market with a disruptive edge, delivered in two key offerings:

In 1983, Nasdaq introduced another innovative feature: depth-of-book (“Level II”) data. Level II allowed traders to see bids and offers at multiple price levels at once. This lifted the veil on the top quote (i.e., the best prevailing bid and offer), giving traders a window into supply and demand and a chance to interpret potential market sentiment at a given moment.

At the time, NYSE listings still accounted for the vast majority of U.S. equities. Nasdaq began to chip away at that dominance by offering faster, more transparent electronic trading. These early innovations were jolted forward by a major catalyst: the market crash of October 19, 1987 (Black Monday).

The 1987 market crash was a pivotal moment for Nasdaq—one that would permanently shape its identity and the financial markets at large.

By this time, Nasdaq was still considered a second-tier market, having been in operation for only 16 years. Its listings, comprising smaller growth-oriented companies, were quoted on an electronic screen but with no automatic execution, as all trades were arranged by phone.

As the market plunged, Nasdaq’s market makers withdrew their quotes and stopped taking phone orders. Retail investors were stuck holding shares that were rapidly losing value. Those who wanted to buy shares at discount prices were unable to trade.

Meanwhile, although NYSE specialists were overwhelmed, they were still able to maintain a semblance of order on the trading floor. The crash damaged Nasdaq’s reputation for reliability, reinforcing the idea that it was less stable than its floor-trading counterparts.

In response, regulators mandated Nasdaq’s adoption of the Small Order Execution System (SOES), a system created in 1984 that automatically filled orders up to 1,000 shares. It would be followed a year later with SelectNet, which allowed larger trades to be executed electronically. Both systems shifted transactions away from phone-based processing.

By the mid-1990s, Nasdaq captured nearly half of all equity trades in the United States. Technology companies were on the rise, and the dot-com boom was just getting started. Electronic communication networks (ECNs)—first pioneered by Instinet in 1969—were now moving into the mainstream. These systems let buyers and sellers match directly, rather than routing everything through market makers. After the SEC’s 1997 Order Handling Rules required ECN quotes to be displayed alongside market-maker quotes on Nasdaq, electronic execution became a normal part of trading, bringing greater efficiency and transparency.

By the late 1990s, households had faster and more reliable Internet connections. Brokers such as Ameritrade and E*TRADE came online, and retail investors gained direct electronic access to trade on Nasdaq-listed markets. This democratization of financial access marked a significant shift in the retail trading world (one to be followed in the early 21st century by commission-free trades and mobile trading apps).

By the end of the decade, Nasdaq’s position on Wall Street was synonymous with tech innovation. With top-tier companies like Apple, Microsoft, Cisco (CSCO), and Amazon.com (AMZN) among its listings, Nasdaq had become the standard-bearer of the 1990s tech boom.

During the dot-com bubble, the Nasdaq Composite rose to 5,048 from 743, reflecting the early enthusiasm of investors in dot-com enterprises and the willingness of venture capitalists to finance the Internet economy. Between early 2000—when the bubble burst—and October 2002, the Nasdaq fell to 1,139, erasing nearly 80% of its gains.

The bust may have scarred Nasdaq’s value, but not its credibility. As the decade would show, Nasdaq remained the primary choice for technology companies despite its significant decline.

Following the dot-com bust, Nasdaq began adopting decimal quotes from the traditional fractional quotes, a transition that began with the NYSE and AMEX a year earlier. With minimum price fluctuations (“ticks”) as small as one cent, bid-ask spreads narrowed and trading costs decreased, attracting higher trading volume among retail and institutional investors alike.

In 2002, Nasdaq shares began trading over the counter under the ticker symbol NDAQ, and in 2005, the company went public. The following year, the SEC approved Nasdaq’s registration as a national securities exchange, marking its transition from a NASD member-owned system to a shareholder-owned securities exchange on par with the NYSE.

During this period of transformation, Nasdaq made a few key acquisitions that expanded its footprint in U.S. securities. It acquired Instinet’s INET ECN in 2005, which built on the exchange’s matching engine and enhanced its trading technology, and the Philadelphia Stock Exchange (PHLX) in 2008, which gave Nasdaq a foothold in the options market and a larger market share in the overall equity market.

These acquisitions reflected its broader strategy of expanding its global footprint. In 2008, Nasdaq also acquired OMX, operator of stock exchanges in the Nordic and Baltic countries. At the same time, it continued to build out its U.S. options business. In 2008, it acquired the Boston Stock Exchange (later renamed BX Options) and launched the Nasdaq Options Market (NOM).

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Adena Friedman, CEO of Nasdaq, speaks at the Fortune Global Forum 2024 in New York City.

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The 2010s and early 2020s brought a series of milestones that reflected both Nasdaq’s global reach and its technological ambitions.

By the early 2020s, Nasdaq had broadened its role across markets and regions while embedding technology more deeply into its core operations.

Alongside its innovations and milestones, Nasdaq has also faced setbacks and scrutiny, ranging from technical breakdowns to regulatory challenges.

In 2011, Donald Johnson, then a managing director of the Nasdaq Stock Market, was sentenced to 42 months in prison for trades he executed on multiple occasions based on nonpublic information he obtained as an executive at Nasdaq.

Nasdaq experienced significant technical problems during Facebook’s IPO, which led to trading delays and order processing errors. The SEC assessed Nasdaq a $10 million penalty for its role in the debacle, citing “poor systems and decision-making” as contributors. The glitch also caused several investment firms to take huge losses. To reimburse these firms, Nasdaq paid out $62 million in compensation for its errors.

In August 2013, a technical glitch caused a three-hour trading halt in all Nasdaq-listed stocks. Following the botched Facebook IPO just a year earlier, questions regarding Nasdaq’s reliability and robustness once again surfaced.

In the mid-2010s, Nasdaq—like the NYSE—drew criticism for charging steep prices for depth-of-book and other proprietary data feeds. Traders and regulators called the fees excessive. In 2018, the SEC reversed certain price increases, and legal challenges continued in the years following. As of 2025, disputes remain unresolved, even as Nasdaq phases in a three-year inflation-linked adjustment to its data-feed pricing.

Nasdaq launched an analytics tool called Pathfinders that tracked the buying and selling behavior of institutional investors. Critics argued it gave subscribers an unfair advantage and risked enabling market manipulation. Nasdaq pulled the product the same year under pressure from regulators and market participants.

The exchange’s credibility was also dented indirectly by its long association with Bernie Madoff, a former chairman of the Nasdaq Stock Market whose firm was one of its most active market makers before his Ponzi scheme shattered investor trust throughout Wall Street when it was exposed in 2008.

From its origins as an electronic quote distribution system to its position as a global marketplace, Nasdaq’s history has been marked by innovation, disruption, and adaptation. Its rise paralleled the spread of technology into business and households, and it became the natural venue for technology companies seeking capital. Through cycles of boom and bust, Nasdaq helped move electronic trading from novelty to norm, shaping today’s digital, globally connected markets.