The Nasdaq system is by far the most important network that connects buyers and sellers in the OTC market. It is essentially a computer system run by FINRA that provides member firms with quotations for over 5,000 OTC securities. Given the fact that more shares trade daily on it than on any of the exchanges, the Nasdaq represents the largest securities market in the U.S.

Types of Issues
Securities trading on the Nasdaq must meet minimum listing requirements. Two types of issues trade on the system:

  • Nasdaq Global Market securities and
  • Nasdaq Capital market securities

Of the two, GMS securities are the more stringently regulated, widely traded and well-known.

Stock Quotation Service Levels
The Nasdaq system provides three levels of stock quotation service - simply called Levels I, II and III - to the securities industry:

  • Level I is available to registered representatives. It displays the inside market only - that is, the best (highest) bids and the best (lowest) asks for securities in the system. Level I prices are not guaranteed, as the market fluctuates too rapidly for a firm quote.
     
  • Level II subscription service is for broker dealers that are order entry firms. Level II allows the broker dealer to see the inside market, as well as the quotes of all market makers and to execute orders over the NASDAQ workstation
     
  • Level III provides subscribers with all of the services of Levels I and II. In addition, Level III allows market makers to update, change or delete their quotes and size of quotes on any security in which they make a market. Level III is the only level that allows quote inputs.
Exam Tips and Tricks
Make sure you know what types of securities trade on each market or exchange! Start with the securities listed on the
NYSE.

Review the important differences between the NYSE and Nasdaq in the following article: The Tale of Two Exchanges.



Broker-Dealers

Related Articles
  1. Insights

    The NYSE and Nasdaq: How They Work

    Learn some of the important differences in the way these exchanges operate and the securities that trade on them.
  2. Investing

    Is The Series 24 Exam Hard?

    What makes the series 24 so challenging? The exam focuses very heavily on the supervision of trading and market making and the supervision of investment banking.
  3. Insights

    What's The Difference Between The Dow And The Nasdaq?

    The way people throw around the words “Dow” and “Nasdaq” makes them seem synonymous with “the market.” But there are important differences.
  4. Insights

    What's a Dealer Market?

    In a dealer market, market participants buy and sell through dealers who are designated as market makers.
  5. Financial Advisor

    What Is A “Broker-Dealer” And Why Should You Care?

    For many investors, the financial services industry is a strange and mysterious place filled with a language all in its own. Terms like “alpha,” “beta” and “Sharpe-Ratio” ...
  6. Investing

    What Does a Dealer Do?

    Dealers possess certain qualities that distinguish them from brokers and traders.
  7. Financial Advisor

    FINRA: How It Protects Investors

    Find out the history of FINRA, and how it's organized to monitor the markets and protect investors.
  8. Personal Finance

    Why You Should Understand The Stock Market

    Even if you don't invest a cent in stocks, you should still understand how the stock market works. Find out why.
Frequently Asked Questions
  1. Depreciation Can Shield Taxes, Bolster Cash Flow

    Depreciation can be used as a tax-deductible expense to reduce tax costs, bolstering cash flow
  2. What schools did Warren Buffett attend on his way to getting his science and economics degrees?

    Learn how Warren Buffett became so successful through his attendance at multiple prestigious schools and his real-world experiences.
  3. How many attempts at each CFA exam is a candidate permitted?

    The CFA Institute allows an individual an unlimited amount of attempts at each examination.Although you can attempt the examination ...
  4. What's the average salary of a market research analyst?

    Learn about average stock market analyst salaries in the U.S. and different factors that affect salaries and overall levels ...
Trading Center