Most of the companies listed on Nasdaq are smaller or less established than most of those on the NYSE and AMEX. Nasdaq has become known as the home of new technology companies, particularly computer and computer-related businesses.
Trading on Nasdaq is initiated by stockbrokers acting on behalf of their clients. These brokers place orders with certain Nasdaq brokers, called market makers, who concentrate on trading specific stocks. The broker and the market maker negotiate to reach a price for the stock.
Unlike other stock exchanges, Nasdaq has no central location where trading takes place. Instead, its market makers are located all over the country and make trades by telephone and via the Internet.
As brokers and market
makers trade stocks directly instead of on the floor of a stock
exchange, Nasdaq is called an OTC (over-the-counter) market. The term
over-the-counter refers to the direct nature of the trading, as in a
store where goods are handed over a counter.
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What is 'QQQQ'? You may have heard this term in the past and not known what it refers to. It is actually the largest non-financial companies listed on The NASDAQ Stock Market: the constituents of the NASDAQ 100 Index.
NASDAQ 100 Index Tracking Stock trades on The NASDAQ Stock Market under the ticker symbol 'QQQQ'. It is actually a one investment portfolio that gives you part ownership in the 100 stocks of the NASDAQ 100 Index.
Your author is neither a trader nor an American, but having discussed the QQQQ at length with some American based colleagues, it seems that this is the prime index used by the army of American day-traders ( here is an interesting article for day trading beginners).
As the NASDAQ 100 Index Tracking Stock trades like stock, you can buy them on margin, sell short or hold your shares for the long term. When you purchase you are investing in the NASDAQ-100 Trust, a unit investment trust that holds shares of the companies in the index. It does not take much of a leap to recognise that an index traded like this provides amply opportunity for highly leveraged speculation.
In fact, there is a maximum limit of 10,000 contracts (both net long or short) that can be held by an individual at one time on the ND (NASDAQ 100 Futures Index). The margin requirements for futures are very similar to the S&P 500 futures, and at the time of writing in 2011 were US$17,500 with a maintenance margin of US$14,000.
This ability to trade with only a fifth of the amount of funds required means that the NASDAQ 100 is a very popular index and the NQ is one of the most popular stock-index futures contracts in the world.
Trust is designed to closely track the price and yield performance of
the index, so you can expect your unit value to move up or down in
closely matching the index.
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