The Evolution of The NASDAQ Stock Market First trading day on February 8th, with quotes on 2,500 securities 1971 1985 Apple and Microsoft list on NASDAQ 2000 1991 / 1996 First market to launch television advertising campaign and WebSite Decimalization & SEC Regulation NMS 1981
Relative quoted spread is the difference between the inside bid and ask for each trade averaged for the month. Contains all NASDAQ National Market stocks and all NYSE issues. Source: NASDAQ Economic Research. Decimalization and technology enhancements have reduced transaction costs Manning Rules Order Handling Rules (Limit Order Display, ECN Integration) 1/16 Quote Integration SelectNet Enhancements Launch of SuperSoes SuperMontage Decimalization Historic Spreads and NASDAQ Market Improvements NASDAQ Market Center
February 25, 2004: The SEC publishes Reg NMS (National Market System) proposal. Features of the proposal include: sub-penny trading, market access, trade-through and market data pricing.
February 2005: Manual markets begin to communicate their transition to an electronic model.
April 6, 2005: The SEC approves Reg NMS, a reform designed to interlink domestic exchanges/markets to enhance competition and provide equal market access for all market participants.
Floor-Based Trading to Emulate NASDAQ’s Electronic Model REg NMS Clip
Total NYSE Market Share is Declining even before Reg NMS
Reflects market share of consolidated tape volume. Off-floor Includes all volume in NYSE-listed securities not reported by the NYSE
Market share in trading of NYSE listed stocks Source: NASDAQ Data includes NASDAQ, Brut, ARCA, INET, and other electronic venues. Does not include routing. NYSE Market Share Off-Floor Electronic Markets
What does market structure mean to you ? Market Reaction On November 17, 2004, Kmart Holding Corporation and Sears, Roebuck and Co agreed to merge. Source: NASDAQ Economic Research Quoted Spread November 17, 2004 KMART SEARS On the day of the merger announcement, Kmart’s spread traded in a narrow band between $0.00 and $0.12, while Sears’ spread ranged from $0.01 to $0.57. (Cents) Sears Trade Halt Sears Share Volume November 17, 2004 Sears Share Volume October 2004 NASDAQ AND OTHER OFF-BOARD NYSE
Stocks of All Sizes Trade Better on NASDAQ Investors on NASDAQ are more likely to get the prices they are quoted, or better, and pay lower transaction costs. SHARES EXECUTED AT OR INSIDE THE QUOTE 82.3% 91.4% 80.7% 91.8% 82.0% 91.8% EFFECTIVE SPREADS (Cents) 1.96 1.37 1.79 1.18 1.82 1.17 SPEED (Seconds) 20.1 6.0 17.7 4.2 18.5 5.1 NYSE NASDAQ Independent, Third-party Execution Quality Statistics as mandated by SEC Rule 11Ac1-5. Averages are share-weighted. Includes all domestic common stocks on NASDAQ National Market and NYSE. Data represent all marketable orders less than 10,000 shares traded by Primary Market only. Source: Market Systems, Inc., 01/2005.. NYSE NASDAQ NYSE NASDAQ In Summary NASDAQ’s Speeds are 3.7x Faster NASDAQ’s Spreads are 0.62¢ Cheaper NASDAQ’s Executions are 10% Better Russell 1000 Stocks Dow Jones US Large Cap Index Stocks S&P 500 Stocks
NASDAQ IS A Market of Industry Leaders Health Care Information Technology Financials Telecom Industrials Energy & Utilities Consumer Materials NASDAQ is home to category-defining companies drawn from all sectors of the economy. By number of companies. Consumer is consumer discretionary and consumer staples. Source: FactSet Research Systems, Inc. 10/2005. NASDAQ’s 3,200 Listed Companies Health Care Consumer Industrials Financials Information Technology Telecom
NASDAQ Continues Momentum in 2005 NASDAQ continues to dominate IPO listings, reduce switches, and build the Dual List program
IPO section: Includes domestic and foreign IPOs (NNM and SCM), best-efforts and bank demutualizations.
Excludes unit investment trusts and fully classified closed-end funds.Does not include ARCX IPOs for 2004 (1 company).
Source: NASDAQ, EquiDesk. Data as of 11/31/2005.
Number of IPOs by Market
NASDAQ has captured 59% of the IPO market in 2005.
NASDAQ has successfully switched 4 companies from the NYSE in 2005 – Sears Holdings, Cadence Design Systems, Tasty Baking, and Nashua Corporation.
A total of 8 companies are currently dual listed on NASDAQ. In 2005, 3 additional companies; Chicago Mercantile Exchange , Nuveen , and Harmony Gold Mining Company , have joined the Dual List program.
Number of Companies that Switched per Year Dual List Program
And most recently… 2002 2005 BRUT Acquisition 2004 Sears Holdings lists with NASDAQ after a 100-year history with NYSE Jet Blue