The Nasdaq, the first electronic stock market, which has helped create a new entrepreneurial, venture capital class in the United States, celebrated its 30th birthday yesterday. Now listing 5,000 companies, the Nasdaq started life on February 8th, 1971 as a "junk pile" for thinly-traded volatile shares; now it boasts some of the best known companies in the world, including Microsoft and Intel.
The Nasdaq - an acronym for National Association of Securities Dealers' Automated Quotation System - buys, offers and sells stocks through an international computer network that displays the best quotations in 52 countries. Even as it celebrates, however, the Nasdaq is struggling with the collapse of the technology companies which made the electronic stock market their home. After an 86 per cent surge in its composite index during 1999, the Nasdaq recorded its worst ever performance last year, dropping more than 50 per cent from its record close of 5,048.62. While it has revolutionised investing and led the way in technological innovation, the Nasdaq is the only major stock market in the world to continue using fractions. Its rival, the New York Stock Exchange (NYSE), converted to decimal pricing last month. The Nasdaq is due to phase in decimilisation within seven weeks.
"Every stock on the NYSE is trading in decimals and we're still waiting on the Nasdaq," said Mr Patrick Healy, a former Nasdaq official who now owns the Issuer Network consultancy. "They market themselves as the technology market, but it looks like the New York Stock Exchange has the better technology."
Nasdaq chief executive Mr Hardwick Simmons rejected the criticism, saying the electronic market could not be compared with the NYSE. Most of the companies which changed people's lives in the last 25 years were on Nasdaq, he said. Investors still pay more to trade on the Nasdaq than on the NYSE, according to a new 2000 Securities and Exchange Commission (SEC) study. The finding came six years after the SEC and the US Justice Department forced Nasdaq to introduce new rules to reduce dealers' spreads. This followed claims that some Nasdaq dealers had conspired to fix prices to increase their profits on the difference between the selling and buying prices on a stock. The Nasdaq market plans to separate from its parent, the National Association of Securities Dealers and open Nasdaq markets in Europe and Japan. It announced late last month it has raised $516 million (€562 million) from investors and appointed a committee to review whether it should go public.
The number of companies traded on the Nasdaq has doubled since 1971 to about 5,000, higher than the 3,500 stocks traded on the NYSE. Nasdaq provided a trading place for newer, less capitalised companies which could not get listed on the NYSE. As they grew, many like Microsoft stayed rather than move to Wall Street.
