NASDAQ's Securing Security Transaction
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ICMR HOME | Case Studies Collection
Case Details:
Case Code : ITSY013
Case Length : 07 Pages
Period : 1997-2001
Pub Date : 2002
Teaching Note : Available
Organization : NASDAQ
Industry : Financial Services
Countries : USA
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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"Nasdaq's new Surveillance Delivery Real-time system is an
alert detection and presentation system that is unmatched in its speed and
ability by any other financial market in the world."
- Gregor S. Bailar, Executive VP and Chief Information
Officer,
NASD, in September 1999.
Background Note
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The story of the second largest US stock market, the National
Association of Securities Dealers Automated Quotation System (Nasdaq), dates
back to the 1960s, when a study was conducted by the Security and Exchange
Commission (SEC)1 for improving the
functioning of the over-the-counter (OTC) market.2
The study recommended that the SEC automate the market.
The responsibility for automating the market was handed over to the National
Association of Security Dealers (NASD).3
Nasdaq was established as a subsidiary of NASD for the above purpose. |
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The exchange started trading operations by 1971 and soon established its
identity as the world's first and largest electronic market.
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The exchange's computerized system facilitated
securities trading by providing traders with current bid and ask price
quotes on OTC stocks and some listed stocks.
It was rated among the world's best-regulated stock markets as it
employed very sophisticated surveillance systems and regulatory
specialists for ensuring investor protection and a competitive trading
environment. Nasdaq introduced many innovative measures for the benefit
of the investors and for ensuring the stability of the markets. In 1984,
it introduced the 'Small Order Execution System' (SOES) to execute small
orders automatically against the best quotations. |
Excerpts >>
1]
The SEC was established in 1934 when security laws (Securities Act of 1933 and
Securities Exchange Act of 1934) were enacted by the US Congress after the great
crash of stock markets in the late 1920s. The primary responsibility of the SEC
was to enforce security laws, to promote stability in the markets, and to
protect investors.
2] Nasdaq is one of the largest OTC markets.
The OTC market is for those securities that are not traded on the exchange
because of their inability to meet listing requirements. Traders generally
negotiate directly with one another over computer networks and the telephone.
NASD controls these activities.
3] NASD was developed by the Code Committee
formed by the investment-banking group under the US National Recovery Act (NRA)
in 1933. NASD is the largest self-regulated organization in the security-trading
industry. NASD develops rules and regulations, conducts regulatory reviews of
member's activities, provides arbitration, and regulates securities markets for
the benefit and protection of the investor.
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