National Association of Securities Dealers Automated Quotations System

The access of bid and ask costs via Level III workout is predicated on an assumption that securities dealers entering this sort of costs to the NASDAQ system are prepared to execute these kinds of trades to your minimum of 1 normal unit of trading which commonly is 100 shares. At the time a bid or ask price is entered to the NASDAQ system, the price is recorded in a central pc file that is viewed by all method subscribers (Sharpe, 1993, p. 55).

As each bid or ask price is entered into NASDAQ via Level III activity, that price replaces all earlier costs entered by the securities dealers for ones security involved. Real trades are consummated through direct negotiation between securities dealers rather than automatic execution through the NASDAQ system. To be listed by NASDAQ, a security should be held by a couple of industry makers registered in the NASD (Sharpe, 1993, p. 55). Additionally, criteria related towards the minimum range of shares publicly held, capital requirements, and total asset needs should be met. Modern day NASDAQ requirements are a minimum of $4 million in total assets along with a minimum market importance of $1 million in publicly held shares (Stevens, 1992, pp. 6263). NASDAQ has grown to become the quantity a couple of stock trader from the United States (Morgenson, 1993, p. 74).

The lead from the New York Reilly, Frank K. (1994). Investment analysis and portfolio management. (4th ed.). Hinsdale, Illinois: The Dryden Press. One from the disadvantages generally associated with NASDAQ is that trades on NASDAQ are a lot more profitable for securities dealers than are trades on a NYSE (Morgenson, 1993, p. 74). This case techniques that securities dealers have a greater incentive to push NASDAQ stocks than they do to push exchange listed stocks. You can find no irrefutable indications that securities dealers engage in these kinds of behavior; however, neither is there any irrefutable evidence that they do not engage in this sort of behavior. This sort of behavior, ought to it occur, would not necessarily be to the detriment of securities investors; however, the capability for investor harm is associated with these kinds of behavior.

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