The leading brokers in South Africa offer their clients access to Nasdaq. It’s the second-largest stock exchange in the United States and provides access to over 3 300 listed companies. Nasdaq was the world’s first electronic stock market and was responsible for most of the over-the-counter (OTC) trades.
With a market cap of over US$ 11 trillion, Nasdaq attracts more highly growth-orientated businesses than any other stock exchange, with a skew towards high-tech enterprises.
What does Nasdaq offer investors and which brokers in South Africa offer access to Nasdaq?
Let’s have a look at one of the most successful stock exchanges in the world and what it offers brokers and dealers.
Top 6 brokers : Access to Nasdaq in South Africa
|AvaTrade||Trading symbol is NASDAQ100 (NAS100)
Allows clients to trade on global assets on Nasdaq.
|eToro||Trading symbol is NSDQ100
Access to primary stock exchanges in US, UK, Germany and Canada.
Offers over 800 socks from 17 different exchanges (excludes JSE)
|Hot Forex||Trading symbol is USA100
Offers 10 different Index CFDs through MT4 including US100 and US500.
|IC Markets||Trading symbol is USTEC
Order matching engine located in the New York Equinix NY4 data centre; processes over 500 000 trades per day with over two thirds of all trades coming from automated trading systems.
|Interactive Brokers||Trading symbol is NASDAQ
Access to thousands of shares across 135 different markets.
Access to CFDs, forex, ETFs and mutual funds.
|Plus500||Trading symbol is NADQ
Over 2 000 financial instruments through multiple markets, including Nasdaq and JSE. Offers markets on indices, hard metals, energies, interest rates and forex.
What is Nasdaq?
Nasdaq is the shortened term for the Nasdaq Stock Market. It is an American stock exchange located at One Liberty Plaza in New York City and operates as a global electronic marketplace to buy and sell securities. Securities are tradeable financial assets.
Nasdaq was founded by the National Association of Securities Dealers (NASD) and commenced operations in February 1971. NASD was a self-regulatory organisation of the securities industry and a predecessor of the Financial Industry Regulatory Authority (FINRA).
Second-largest stock exchange in the US
Nasdaq is ranked second in the world on the list of stock exchanges by market capilisation, trailing behind the New York Stock Exchange (NYSE). The electronic exchange is owned by Nasdaq Inc. and is monitored by the Securities and Exchange Commission (SEC).
Only electronic trading
Nasdaq was the first-ever electronic stock exchange. It does not have a physical trading floor; all financial assets are traded through an automated network of computers. Products traded by Nasdaq can be traded via third-parties, ECNs and derivatives.
Nasdaq is a dealer’s market whereas NYSE is an auction market. Investors participate through a dealer rather than directly with each other. NYSE allows individuals to transact between each other on an auction basis.
Attracts largest blue-chip companies
Nasdaq’s listed companies are some of the largest blue-chip companies in the world. Notably, the stock exchange has a skew towards the technology sector with the biggest names in the computer, Internet and high-tech software listed on Nasdaq. This includes Microsoft, Google, Amazon, Apple, Adobe and Intel.
Highest trade volume in the world
Nasdaq has the highest trade volume in the United States. More than US$ 14 trillion worth of company assets are traded on the Nasdaq.
Due to the nature of its markets, more volatile trades are found on Nasdaq. The stock exchange lists more fast-growth high-tech businesses that potentially have more scope for dramatic price movement. Among the high-tech companies listed companies on Nasdaq are Google, Amazon, Facebook and Apple.
Nasdaq is the preferred stock exchange among participants looking for the potential in rapid price movements. NYSE offers shares that are more established and stable.
Did you know?
Nasdaq is the acronym for National Association of Securities Dealers Automated Quotations.
What is the Nasdaq index?
To clear up some confusion because the two are used interchangeably; Nasdaq is the electronic stock exchange while the Nasdaq Composite is an index that tracks all stocks listed on the exchange, currently about 3 300 in total. The composite excludes mutual funds, preferred stocks and derivative securities.
A stock market index measures a stock market or a subset of the stock market. Indexes like the Nasdaq indexes help traders and investors compare current price levels with past prices to calculate market performances.
Bear in mind, you cannot trade the Nasdaq indexes nor the Dow or S&P indexes for that matter. They represent the performance of groupings of stocks in the form of a mathematical average and act as a benchmark for developing index funds.
How are Nasdaq indexes valued?
Stock market indexes are valued differently, ranging from market-cap weighting, revenue-weighting, float-weighting and fundamental weighting.
Nasdaq indexes have values based on market-cap weighting, meaning companies with higher market capitalisation carry a higher weightage in the index. Weighting is a method of adjusting the individual impact of items in the index.
Traders and investors follow different indexes to judge market movements. So, the Nasdaq Composite Index will be evaluated against the Dow Jones Industrial Average (DJIA) and the S&P 500 Index. Those are the three most popular stock market indexes for tracking market performance in the United States.
What is the difference between Nasdaq Composite and Nasdaq 100?
The two main Nasdaq indexes are Nasdaq Composite and Nasdaq 100.
Nasdaq Composite Index
The Nasdaq Composite Index covers all stocks listed on the Nasdaq Stock Exchange. To be included in the composite index, a stock must be listed exclusively on the Nasdaq stock exchange and must be a common stock of an individual company.
Derivatives, preferred stocks, exchange-traded funds (ETFs) and debenture securities are excluded for the Nasdaq Composite index.
The Nasdaq Composite Index is one of the most widely followed stock indexes in the United States. It is usually cited along with the Dow Jones Industrial Average (DJIA) and the S&P 500.
Nasdaq 100 Index
The Nasdaq 100 Index tracks the 100 largest non-financial stocks listed on the Nasdaq Stock Market. Non-financial sectors include technology, retail, healthcare, industrial and biotechnology, among others. To be included in the Nasdaq 100 index, a stock must be listed exclusively on the Nasdaq Stock Market.
The Nasdaq 100 Index is skewed towards the technology sector, with this highly-capitalised sector accounting for more than half (54 percent) of the index’s weight. The five largest stocks in the index are Microsoft, Google, Apple, Microsoft and Google.
Consumer services is the next largest sector on the Nasdaq 100 Index and represents a collection of retailers, restaurant chains and retailers.
The balance of the index mostly comprises stocks from the telecommunications, healthcare and industrial sectors. The diversity of companies on the Nasdaq 100 index is said to be the driving factor behind strong returns realised in the past twenty years.
Nasdaq market tiers
The Nasdaq Stock Market has three different market tiers:
- Capital Market (NASDAQ-CM small cap)
An equity market for companies that have relatively small levels of market capilisation. These small capitalised companies are subject to less stringent requirements for listing on the stock exchange.
- Global Market (NASDAQ-GM mid cap)
Made up of 1 450 stocks that meet the strict financial and liquidity requirements of the Nasdaq stock exchange as well as corporate governance standards.
- Global Select Market (NASDAQ-GS large cap)
Made up of a composite of US-based and international stocks weighted on market capitalisation. This market consists of 1 200 stocks that meet Nasdaq’s stringent financial and liquidity requirements as well as corporate governance standards. The Global Select Market is regarded as more exclusive than the Global Market.
Which brokers offer access to Nasdaq
- Index brokers
Brokers cannot invest directly in an index. Rather, index funds are created by index brokers to track a particular index’s performance. The brokers create portfolios that mimic elements of the index and buy and sell accordingly on behalf of their clients for a fee or commission.
Index funds form part of fund management. Brokers are able to cherry pick stocks and market timing and if they get it right, the fund should generate profits.
- Options brokers
Option brokers offer a variety of services to people wanting to invest in stock options. They offer investment advice and interest-bearing accounts but their main role is to act as an intermediary between the investor and the options market.
Options are financial assets that are based on the value of underlying securities such as stocks. There are two types of options: call options (buy) and put options (sell). Depending on the type, an options contract gives a trader or investor the right to buy or sell stocks at a fixed price within a specific period of time.
Stock options are traded through stock exchanges like Nasdaq while exotic options are traded over-the-counter.
- Futures brokers
Futures are derivative-based contracts that bind a buyer and a seller to transact an underlying asset at a set future date and price. Regardless of the market price at the time the futures contract expires, the buyer must purchase the asset or the seller must sell the asset at the predetermined price.
An underlying asset can be a stock, index, commodity or currency. It can even be another derivative, such as a weather derivative which is used to hedge against the risk of weather-related losses.
Futures brokers facilitate trading through a futures exchange. Nasdaq futures allow investors to hedge with or speculate on the future value of various components of the Nasdaq market index.
Futures are always traded through a stock exchange. Forwards are always traded over-the-counter or independently between two parties.
Can you trade forex and CFDs through Nasdaq?
Foreign exchange (forex) and Contract for Differences (CFDs) are over-the-counter products. Financial assets that are traded over-the-counter are traded via a dealer network and not through a centralised stock exchange.
Forex and CFD trading is facilitated through the interbank market and almost entirely transacted electronically.
The interbank market is the global network used by brokers and financial institutions to trade currencies and CFDs between themselves. It’s made up of a network of financial institutions and brokerages that trade alongside the top banks. Interbank means ‘between banks’.
CFD trading is not available to US traders because it is against US securities law. They are banned because they are an over-the-counter (OTC) product and do not pass through regulated stock exchanges. Trading CFDs is legal in South Africa. CFD brokers are regulated by the FSCA and operate under license.
What does it mean when Nasdaq is down?
When Nasdaq is down, it does not mean there has been a power outage and the systems are down.
No, when Nasdaq is down it usually the Nasdaq Composite Index is losing value. Likewise, if Nasdaq 100 is down, the sub-composite of the top 100 companies listed on Nasdaq is losing value.
When a stock market index is down, it indicates the broader financial markets are under pressure. Composite indexes represent a broad base of industry sectors and it could be that one or more are influencing the index heavily because of unexpected selling activity in the group of stocks.
Main differences between Nasdaq and NYSE
|NASDAQ STOCK EXCHANGE
|NEW YORK STOCK EXCHANGE (NYSE)|
|Established in 1971||Earliest established organisation in 1792
Formerly established in 1817
|Second-largest stock exchange in US by market capitilisation.||Largest stock exchange in the world by market capitalisation.|
|Has over 3 300 listed companies that represent a market capitilisation of US$11 trillion||Has over 2 400 listed companies that represent over US$ 21 trillion in market capitalisation|
|Home to the Big Tech growth-orientated companies but wider spectrum in terms of size of companies||Home to the big Blue Chip companies that have existed for decades; regarded as more established and stable|
|Electronic stock exchange, no trading floor||Retains a physical trading floor on Wall Street in New York City; a significant portion of trade flows through its data center in New Jersey|
|Dealer market; the highest bid for a stock is matched with the lowest asking price
Nasdaq brokers buy and sell stocks through a market maker rather than from each other
|Auction house; buying and selling happens in split seconds electronically through dealers|
|An average of 14 market makers per stock||One Designated Market Maker (DMM) per stock|
Nasdaq is a publicly-traded company and investors can buy shares in the stock exchange. It has consistently been one of the top-performing exchanges in the world and appears to have weathered the Covid-19 pandemic better than others. Nasdaq is highly profitable with company earnings at 34 percent net income margins (3rd quarter 2020).
What appeals to brokers and dealers around the world is Nasdaq attracts highly growth-orientated companies with a skew towards technology. It’s home to the biggest names in the computer, Internet and biotechnology sectors. The likes of Apple, Amazon, Microsoft and Alphabet have touched the trillion-dollar share mark in the US market.
Due to the nature of its market, stocks listed on the Nasdaq are more volatile than the NYSE but they can boast high returns. For growth-orientated tech stocks, Nasdaq brokers closely follow the Nasdaq Composite Index and Nasdaq 100 Index.
Featured Writer on SA Shares, Forexsuggest and Forextrading.africa