For many first-time investors, some financial market terminology can be confusing. A question that often crops up is ‘what is the difference between the Nasdaq and the nasdaq100?’. Effectively this question can be answered by defining the difference between a ‘Stock Exchange’ and a ‘Stock Exchange Index’.
What is a stock exchange?
A Stock Exchange is a marketplace where the buyers and sellers of company stock (aka shares) can transact.
The owners of Stock Exchanges oversee that the companies whose stock is listed adhere to rules that ensure fair market conditions for buyers and sellers. In short, they make sure that companies are continually disclosing information that buyers and sellers would deem necessary to make informed financial decisions regarding the buying, holding, or selling of stock.
The organisations that oversee Stock Exchanges earn the bulk of their revenue from transaction fees. In fact, Stock Exchange companies can be incredibly lucrative. In 2020, the largest Stock Exchange in the world, the New York Stock Exchange (NYSE), generated US $50.9 billion in revenue. The next largest Stock Exchange in the world, the Nasdaq, generated US $5.6 billion in revenue in the same year.
Interestingly, many organisations that own exchanges are themselves listed on exchanges. The owner of the NYSE, Intercontinental Exchange (NYSE: ICE), can be found on none other than the NYSE. The owner of the Nasdaq, Nasdaq Inc (NASDAQ: NDAQ), is, of course, listed on the Nasdaq.
What is a stock exchange index?
A Stock Exchange Index is a way to measure the stock performance of companies listed on Stock Exchanges. Companies can be grouped by size, industry, or several other categorisations.
The performance of the companies in an index informs the performance of the index. Essentially, if the share price of the companies in the index are rising, so will the index.
A Stock Exchange Index may measure the entire Stock Exchange or only a section of the Stock Exchange. For example, the Nasdaq 100 measures the performance of the largest 100 companies that are listed on the Nasdaq. The Nasdaq Composite is a similar Stock Exchange Index, except this Index does not discriminate. As such, the Nasdaq Composite is representative of all 3,700 companies listed on the Nasdaq.
Risk Warning: Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange, you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and, therefore, you should not invest money you cannot afford to lose. You should make yourself aware of all the risks associated with foreign exchange trading and seek advice from an independent financial adviser if you have any questions or concerns as to how a loss would affect your lifestyle.
Editors’ Picks
AUD/USD clings to recovery gains near 0.6550 on weaker USD, upbeat mood
AUD/USD holds sizeable gains near 0.6550 in the Asian session on Monday. A sharp pullback in the US bond yields prompts some US Dollar profit-taking after US President-elect Trump named Scott Bessent as Treasury Chief. Moreover, the upbeat market mood supports the risk-sensitive Aussie.
USD/JPY tumbles over one-big figure toward 153.50
USD/JPY slides back closer to 153.50 in the Asian session on Monday. Retreating US Treasury bond yields drags the US Dollar away from a two-year top high and drives flows towards the lower-yielding Japanese Yen, though the BoJ uncertainty could limit losses for the pair.
Gold price corrects to near $2,700 on sliding US yields, US Dollar
Gold price correcxts sharply to $2,700 from a near two-week highs of $2,721 early Monday. The US Dollar pulls back from a two-year high alongside retreating US bond yields and benefits the commodity while a positive risk tone amid a likely ceasefire between Israel and Lebonan also dents the safe-haven metal.
Elections, inflation, and the bond market
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
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