1963 – The Securities and Exchange Commission releases a study finding the over-the-counter market in need of improved regulation, and proposes that the market be automated. The SEC allows the National Association of Securities Dealers to run the market. At the time, all market activity is handled entirely over the telephone and via physical delivery of certificates. No central place exists to obtain fair market quotes.
1968 – The NASD retains Bunker-Ramo Corp. to help design and build a new, automated system to be called the NASD Automated Quotation, or Nasdaq. Cost for the five-year project is estimated at $25 million.
1971 – On Feb. 8, Nasdaq begins operations, displaying representative quotes for more than 2,500 OTC securities.
1972* – Shares traded for the year: 2.2 billion. Index close: 133.73.
1974* – Shares traded for the year: 1.1 billion. Index close: 59.82.
1976 – The NASD purchases the new system from Bunker-Ramo for approximately $10 million.
1977 – Steven Wozniak and Steven Jobs of Apple Computer introduce first low-priced, mass-produced personal computer.
1980 – Nasdaq replaces Bunker-Ramo terminals with new PC-based computers provided by the Harris Corp. PCs feature single-page viewing of inside quotes – the best bid and offer prices – reducing price spreads on more than 85 percent of Nasdaq stocks.
1981 – International Business Machines (IBM) introduces PCs featuring user-friendly graphical interface from then unknown software provider Microsoft Corporation.
1982 – The National Market System (NMS) is formed, and includes the top Nasdaq stocks with new, specialized listing requirements. Trades are now subject to continuous real-time reporting. Shares traded for the year: 8.4 billion. Index close: 232.41
1984 – Nasdaq rolls out Small Order Execution System (SOES) for executing small orders of 1,000 shares or less against the best quotations.
1986 – A second NASD operations center is opened in Rockville, Md as a full backup to the main facility housed in Trumbull, Conn.
1987 – Nasdaq rolls out its workstation service PC-based platform with customization features and dynamic data updating via a continually-broadcast feed.
1988 – The Advanced Computerized Execution System (ACES), a proprietary order-routing system, is introduced. The OTC Bulletin Board for posting information about Nasdaq securities is introduced.
1990 – SelectNet, an online screen-negotiation and execution system, is introduced for orders too large to be handled by SOES. The system does not place size limits on orders, and is not an automatic-execution system, like SOES. SelectNet provides messaging between market participants who are negotiating prior to trading. Nasdaq initiates a five-year, $180 million upgrade of its core information-technology infrastructure, including its AT&T network backbone.
1991 – Shares traded for the year: 41.3 billion. Index close: 586.34. Nasdaq International Service begins, with Nasdaq NMS securities trading in early U.S. hours while London financial markets are open.
1993 – Nasdaq replaces Unisys 1100s with Unisys 2200 mainframes capable of handling more than 500 transactions per second. Nasdaq's network had begun to buckle under its own weight, with volumes growing exponentially each year.
1994 – In Aug., a squirrel causes a 30-minute trading interruption after it gnawed through a transformer line near the Trumbull data center. Oct. and Nov., the U.S. Justice Department and the SEC open investigation into possible price fixing and other illegal trading practices among Nasdaq dealers and traders. Nasdaq volume surpasses that of the New York Stock Exchange in annual share volume for the first time ever. Shares traded for the year: 74.3 billion. Index close: 751.96.
1995 – Nasdaq trades over 100 billion shares this year. With dramatic volume
increases and occasional activity spikes, Nasdaq is forced to limit trading at least 60 times during the year, and suspend SOES trading 30 times. Nasdaq replaces DOS-based workstation software used by nearly 5,000 traders with a Microsoft Windows-based system called Workstation II. New windows-based PCs give users the ability to configure screens based on their trading preferences. A new system called RADAR (Research and Data Analysis Repository) is introduced. The $4.5 million data-analysis system adds artificial-intelligence features to the existing market-surveillance system called SWAT (StockWatch Automated Tracking). In Dec., Nasdaq announces completion of its five-year core infrastructure upgrade. The $180 million migration includes upgrade of its 9.6 kb/sec AT&T analog network to the 56kb/sec digital MCI backbone, still in place.
1996 – In the wake of the price-fixing allegations, the NASD creates NASD Regulation to oversee its regulatory activities, and starts running Nasdaq Stock Market as a separate unit. Nasdaq upgrades speed of Tandem Computer processors that run SOES, SelectNet, ACES and the OTC Bulletin Board, and completes the upgrade of these applications. In addition, Nasdaq launches nasdaq.com, the main web site geared towards investors and issuers, providing data on stocks, charts, 15-minute delayed quotes, and other pertinent information on Nasdaq. Over the next year, Nasdaq spends $7 million on developing this web site. Nasdaq proposes new NAqcess trading service to automate matching of small orders. NAqcess is designed to replace SOES and improve pricing available to small investors, but is eventually abandoned.
1997 – The SEC approves Nasdaq's request to allow trading in increments of sixteenths for stocks trading above $10 a share. The previous minimum increment was an eighth. The change reportedly results in average-quoted spread for these issues to decline by 20.5 percent. The SEC also imposes new trading rules mandating the public display of customer limit orders, thereby reducing prices and average spreads by as much as 40 percent.
Many market makers react by sending their limit orders to electronic communications networks (ECNs) to protect profits. ECNs begin to proliferate. Some critics say these formerly proprietary trading systems detract from full disclosure of market-maker activities. The SEC passes rule allowing ECNs to become full-fledged stock markets. ECNs must indicate whether they want to be categorized as a formal exchange or remain an independent broker dealer and Nasdaq member firm. Each category is subject to its own regulatory restrictions. Thirty Nasdaq trading firms reach $910 million settlement in 1994 class-action suit, alleging pricing collusion and other unfair trading practices.
1998 – Nasdaq launches nasdaqtrader.com, aimed at the institutional trader, with contract information, regulations and other technical information. Nasdaq doubles investment in its web sites, spending $14 million in development for the year. Nasdaq also earmarks $600 million for enhancing its global network over the next five years. Plans include a new T1 backbone provided by MCI Worldcom. Nasdaq replaces DOS-based Mutual Fund Quotation system with a secured, web-based site to be used as a litmus test and possible precursor to future online trading capabilities. Nasdaq and the American Stock Exchange merge. The AMEX remains an independently-run auction market, while Nasdaq remains a multiple-dealer computer-based market. However, backoffice systems for the two, including finance, administration and marketing, begin consolidating, potentially lowering transactions costs for brokers and investors. Nasdaq signs agreement with Durango, Colo.-based OptiMark Technologies to introduce its new trading facility in Aug.f 1999. Four new ECNs emerge: Attain, STRIKE, NexTrade and BRUT.
Nasdaq-AMEX Market Group and The Stock Exchange of Hong Kong (SEHK) launch a joint web site geared towards investors. The site, which can be accessed at www.porttracker.nasdaq-sehk.com, features Nasdaq portfolio tracking and pricing of stocks listed on Nasdaq, the AMEX and the SEHK. Shares traded for the year: 202 billion. Index close: 2192.69
1999 – In January, More than 24 firms and 50 individual traders reach $27 million settlement with the SEC over Nasdaq stock-trading violations stemming from the 1994 investigation.
New web-based trading facilities are being considered. Meanwhile, Nasdaq prepares to roll out the OptiMark Trading System. A proposal has been approved by the NASD board to merge the SOES and SelectNet systems. However, the proposal has not yet been filed with the SEC. A Nasdaq spokesperson expects this process to move forward in early spring.
2000 and beyond – The NASD plans to use technology provided by Tibco of Palo Alto to integrate its backoffice trading data with the AMEX and the Philadelphia Stock Exchange (which it hopes to acquire in 1999). Nasdaq continues to develop a new electronic order book for the AMEX, making it the largest electronic order-entry facility used by a primary U.S. exchange. Nasdaq begins work building a video-based site in New York's Times Square, featuring studio space for television networks and a Nasdaq stock ticker to broaden market awareness. Nasdaq also plans to introduce decimal pricing early in the year.
