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3 decades of Nasdaq
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February 7, 2001: 3:13 p.m. ET
Binding a far-flung market and rivaling the NYSE, Nasdaq has gone far
By Staff Writer Jake Ulick
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NEW YORK (CNNfn) - Thirty years ago, the trade group that speaks for Wall Street set out to tame the wild, over-the-counter stock market -- a frontier of penny shares and the not-always-reputable brokers who sold them.
A funny thing happened along the way. Sure, the group, the National Association of Securities Dealers, eventually linked a fragmented market of tiny public companies.
And yes, the National Association of Securities Dealers Automated Quotations system, or Nasdaq, now rivals the New York Stock Exchange.
But the upstart Nasdaq, which turns 30 Thursday, has become something else: a quirky part of American culture. A sponsor of NFL halftime shows and a staple of TV newscasts, the Nasdaq has spread far beyond Wall Street.
"It's funny to watch the evolution of an index that was relatively unknown for its first 15 years," said Ned Riley, chief investment strategist at State Street Global Advisors. "If you really want to expose your portfolio to leading-edge technology companies, the Nasdaq has the bulk of those stocks."
 Those stocks like Microsoft (MSFT: Research, Estimates), Cisco Systems (CSCO: Research, Estimates) and Intel (INTC: Research, Estimates), favorites among individual investors, powered the bull market of the late 1990s. Their losses since March helped hand the index its worst annual performance ever last year: A 39.2 percent slide.
The Nasdaq, the first electronic stock market, has also become the most speculative one, a place of wild swings in share prices. Qualcomm (QCOM: Research, Estimates) rose nearly 3,000 percent in 1999. The next year, eToys (ETYS: Research, Estimates) parted with more than 99 percent of its value. The Nasdaq is home to Emulex and PairGain Technologies, two companies that saw big gyrations on false information that led to criminal charges.
But for companies that couldn't meet NYSE listing requirements, the Nasdaq over three decades has become the place for fast-growing firms to raise the capital that sparked big changes in how the world communicates and shares information.
At 30, the Nasdaq sports some astounding numbers. Last year, 442.7 billion shares traded, up 62 percent from 1999 levels. Average daily share volume reached 1.75 billion in 2000, compared with 1.08 billion the year before.
On Jan. 3, when the Federal Reserve surprised the market by cutting interest rates, a record 3.1 billion Nasdaq shares traded. The NYSE traded 1.8 billion that day. But the comparison isn't entirely fair: the NYSE counts a buy and sell order as one trade while the Nasdaq records that as two.
Battle of the markets
Once unthinkable, any look at today's Nasdaq is impossible without comparisons to the NYSE, the nation's oldest exchange.
"When I was a rookie, the NYSE was somewhat of a white shoe club," said Robert Stovall, market analyst at Prudential Securities.
 The NYSE relies on the specialist system, in which people on the exchange floor match buy and sell orders to maintain the flow of trading. Nasdaq orders, by contrast, are paired electronically.
For individual investors, the differences between the two methods can be tough, if not impossible, to discern. Different studies have come up with varying answers as to which market ultimately executes trades cheaper and faster. The latest study found costs higher for Nasdaq trades. The Nasdaq disagreed with those findings.
But this much is clear: Thirty years ago, the over-the-counter market was disconnected, less regulated and lacked the credibility it now has. The Nasdaq changed that.
The over-the-counter market "had a certain amount of distrust then," said Prudential's Stovall, who began his career at Reynolds Securities, a long-ago predecessor of Morgan Stanley Dean Witter.
Finding price information was difficult.
"The Nasdaq pulled all that together," Stovall said.
The NYSE and Nasdaq have become competitors over the years. Both markets will gladly disclose when a company moves from one market to another.
But few big Nasdaq companies feel compelled to jump to the NYSE the way firms on the American Stock Exchange once left for the Big Board.
"It used to be that as companies got big, they wanted to get to the New York Stock Exchange," said Yale Hirsch, editor of the "Stock Trader's Almanac." "But no more."
 On at least one front, the NYSE has the edge: decimalization.
The NYSE last month was first to completely convert to decimal stock quotes from fractions. The Nasdaq plans a full decimal shift by April 9.
And then there's prestige. A place of tradition, where a man without a tie won't be let on the trading floor, the NYSE is kind of an anchor of Wall Street, a place of symbolic importance that Nasdaq's Times Square locale can't match.
Nasdaq makes it to Main Street
If the words "technology" and "Nasdaq" seem synonymous, they're not. Plenty of tech companies like Nortel Networks (NT: Research, Estimates), EMC (EMC: Research, Estimates), Compaq Computer (CPQ: Research, Estimates) and Nokia (NOK: Research, Estimates) trade on the NYSE.
At the same time, the Nasdaq's 3,000-plus listings are not all technology firms. PacifiCare (PHSY: Research, Estimates) and Sovereign Bancorp (SVRN: Research, Estimates) trade there. So do the biotechs Amgen (AMGN: Research, Estimates) and Biogen (BGEN: Research, Estimates).
And in a kind of cross-pollination between the two markets, Dow Jones & Co. in late 1999 added two Nasdaq stocks, Microsoft and Intel, to the Dow industrials.
This year, the Nasdaq is in the process of spinning itself off from the NASD and ultimately may sell shares to the public
An IPO would be fitting. Nasdaq initial public offerings raised more than $52 billion last year.
Still, at 30 years old, the Nasdaq's fast-entry into everyday language counts among its most remarkable, if strange, achievements.
The Nasdaq seems at home in a nation fascinated by the future, by technology and ever searching for, even gambling on, the next new thing.
"I do think it is a reflection of our society," said State Street's Riley. "Fast, short-term and speculative in nature." 
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