The Nasdaq Stock Market is an American stock exchange based in New York City. It is the most active stock trading venue in the U.S. by volume, and ranked second on the list of stock exchanges by market capitalization of shares traded, behind the New York Stock Exchange. The exchange platform is owned by Nasdaq, Inc., which also owns the Nasdaq Nordic stock market network and several U.S.-based stock and options exchanges. Although it trades stock of healthcare, financial, entertainment, retail, and food businesses, it focuses more on technology stocks. The exchange is made up of both American and foreign firms, with China and Israel being the largest foreign sources.
Day trading is a form of speculation in securities in which a trader buys and sells a financial instrument within the same trading day, so that all positions are closed before the market closes for the trading day to avoid unmanageable risks and negative price gaps between one day's close and the next day's price at the open. Traders who trade in this capacity are generally classified as speculators. Day trading contrasts with the long-term trades underlying buy-and-hold and value investing strategies. Day trading may require fast trade execution, sometimes as fast as milli-seconds in scalping, therefore direct-access day trading software is often needed.
A market maker or liquidity provider is a company or an individual that quotes both a buy and a sell price in a tradable asset held in inventory, hoping to make a profit on the bid–ask spread, or turn. The benefit to the firm is that it makes money from doing so; the benefit to the market is that this helps limit price variation (volatility) by setting a limited trading price range for the assets being traded.
TradeStation Group, Inc. is the parent company of online securities and futures brokerage firms and trading technology companies. It is headquartered in Plantation, Florida, and has offices in New York; Chicago; Richardson, Texas; London; Sydney; and Costa Rica. TradeStation is best known for the technical analysis software and electronic trading platform it provides to active traders and certain institutional trader markets. TradeStation Group was a Nasdaq GS-listed company from 1997 to 2011, until it was acquired by Monex Group, a Tokyo Stock Exchange-listed parent company of one of Japan's leading online securities brokerage firms.
The Securities Exchange Act of 1934 is a law governing the secondary trading of securities in the United States of America. A landmark piece of wide-ranging legislation, the Act of '34 and related statutes form the basis of regulation of the financial markets and their participants in the United States. The 1934 Act also established the Securities and Exchange Commission (SEC), the agency primarily responsible for enforcement of United States federal securities law.
The Depository Trust & Clearing Corporation (DTCC) is an American financial market infrastructure company that provides clearing, settlement and trade reporting services to financial market participants. It performs the exchange of securities on behalf of buyers and sellers and functions as a central securities depository by providing central custody of securities.
In banking and finance, clearing refers to all activities from the time a commitment is made for a transaction until it is settled. This process turns the promise of payment into the actual movement of money from one account to another. Clearing houses were formed to facilitate such transactions among banks.
An electronic communication network (ECN) is a type of computerized forum or network that facilitates the trading of financial products outside traditional stock exchanges. An ECN is generally an electronic system accessed by an electronic trading platform that widely disseminates orders entered by market makers to third parties and permits the orders to be executed against them in whole or in part. The primary products that are traded on ECNs are stocks and currencies. ECNs are generally passive computer-driven networks that internally match limit orders and charge a very small per share transaction fee.
OTC Markets Group, Inc. is an American financial services corporation that operates a financial market providing price and liquidity information for almost 12,400 over-the-counter (OTC) securities. The group has its headquarters in New York City. OTC-traded securities are organized into three markets to inform investors of opportunities and risks: OTCQX, OTCQB and Pink.
Algorithmic trading is a method of executing orders using automated pre-programmed trading instructions accounting for variables such as time, price, and volume. This type of trading attempts to leverage the speed and computational resources of computers relative to human traders. In the twenty-first century, algorithmic trading has been gaining traction with both retail and institutional traders. A study in 2019 showed that around 92% of trading in the Forex market was performed by trading algorithms rather than humans.
The Advanced Computerized Execution System (ACES) is a NASDAQ subscription service paid for by market makers that allows order-entry firms trading in Nasdaq Capital Market and Nasdaq global market stocks access to a market maker's internal trading system to route to them using the ACES "Pass-Through". The market maker then executes the order internally, and sends a confirmation and trade report back through ACES to the order entry firm.
Options Clearing Corporation (OCC) is a United States clearing house based in Chicago. It specializes in equity derivatives clearing, providing central counterparty (CCP) clearing and settlement services to 16 exchanges. It was started by Wayne Luthringshausen and carried on by Michael Cahill. Its instruments include options, financial and commodity futures, security futures, and securities lending transactions.
Intercontinental Exchange, Inc. (ICE) is an American multinational financial services company formed in 2000 that operates global financial exchanges and clearing houses and provides mortgage technology, data and listing services. Listed on the Fortune 500, S&P 500, and Russell 1000, the company owns exchanges for financial and commodity markets, and operates 12 regulated exchanges and marketplaces. This includes ICE futures exchanges in the United States, Canada, and Europe; the Liffe futures exchanges in Europe; the New York Stock Exchange; equity options exchanges; and OTC energy, credit, and equity markets.
The Financial Industry Regulatory Authority (FINRA) is a private American corporation that acts as a self-regulatory organization (SRO) that regulates member brokerage firms and exchange markets. FINRA is the successor to the National Association of Securities Dealers, Inc. (NASD) as well as to the member regulation, enforcement, and arbitration operations of the New York Stock Exchange. The U.S. government agency that acts as the ultimate regulator of the U.S. securities industry, including FINRA, is the U.S. Securities and Exchange Commission (SEC).
The National Market System (NMS) is a regulatory mechanism that governs the operations of securities trading in the United States. Its primary focus is ensuring transparency and full disclosure regarding stock price quotations and trade executions. It was initiated in 1975, when, in the Securities Acts Amendments of 1975, Congress directed the Securities and Exchange Commission (SEC) to use its authority to facilitate the establishment of a national market system. The system has been updated periodically, for example with the Regulation NMS in 2005 which took into account technological innovations and other market changes.
High-frequency trading (HFT) is a type of algorithmic trading in finance characterized by high speeds, high turnover rates, and high order-to-trade ratios that leverages high-frequency financial data and electronic trading tools. While there is no single definition of HFT, among its key attributes are highly sophisticated algorithms, co-location, and very short-term investment horizons in trading securities. HFT uses proprietary trading strategies carried out by computers to move in and out of positions in seconds or fractions of a second.
In securities trading, same-day affirmation (SDA) also known as T0 refers to completing the entire trade verification process on the same day that the actual trade took place, and was invented in the early '90s by James Karat, the inventor of straight-through processing, in London. Trade verification is carried out on the institutional side of the market between the investment manager and the broker/dealer. This process ensures that the parties are in agreement about the essential trade details.
Interactive Brokers, Inc. (IB), headquartered in Greenwich, Connecticut, is an American multinational brokerage firm. It operates the largest electronic trading platform in the United States by number of daily average revenue trades - in 2023, it processed an average of 3 million trades per trading day. The company brokers stocks, options, futures contracts, EFPs, futures options, forex, bonds, mutual funds, and cryptocurrency. It offers omnibus and non-disclosed broker accounts and provides clearing services to 200 introducing brokers worldwide. It has operations in 34 countries and 27 currencies and has 2.6 million institutional and individual brokerage customers, with total customer equity of $426 billion as of December 31, 2023. In addition to its headquarters in Greenwich, Connecticut, the company has offices in major financial centers worldwide. More than half of the company's customers reside outside the United States, in approximately 200 countries.
A clearing house is a financial institution formed to facilitate the exchange of payments, securities, or derivatives transactions. The clearing house stands between two clearing firms.
For three hours on August 22, 2013, trading was halted on the Nasdaq Stock Market. Trading on the exchange stopped at 12:14 pm and resumed at 3:25 pm, with 35 minutes left of trading for the day. One week after the trading halt NASDAQ OMX credited the freeze to an overloading of the Securities Information Processor (SIP) caused by reconnection issues with the New York Stock Exchange Arca. The freeze received substantial media coverage and generated discussions on the security of increasingly technologically advanced stock exchanges. The event coined the term "flash freeze" following the earlier "flash crash" on May 6, 2010.
