Nasdaq (NDAQ) | CompanyGraph

Nasdaq, Inc.

NDAQ · United States

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Financial Data & Stock Exchanges Interface Platform Intermediation

Runs a government-licensed electronic stock exchange that matches buyers and sellers and sells the resulting trade data to financial firms.

Nasdaq runs a federally licensed electronic marketplace — under SEC licence 34-12025 — that matches buyers and sellers of stocks between 9:30am and 4:00pm each trading day, with every completed trade settled through the DTCC and recorded on a consolidated tape that Nasdaq sells as data to vendors like Bloomberg and Thomson Reuters. Because the volume of those tape records determines the size of Nasdaq's data licensing income, more trading activity means more data revenue, and more data revenue depends on keeping the most active traders — high-frequency market makers — physically close to the matching engine in Nasdaq's Carteret, New Jersey data centre, where server proximity determines who gets order priority; since rack space in Carteret is finite, that data centre sets a hard ceiling on how much liquidity Nasdaq can host. The listing standard for the Nasdaq Global Select Market reinforces the whole cycle: companies meeting its $1.1 billion market-cap and governance thresholds become eligible for S&P 500 inclusion, which pulls mandatory replication trading from index funds run by Vanguard and BlackRock onto Nasdaq's tape, deepening the data pool further and making Nasdaq listings more attractive to the next round of technology companies seeking that same index eligibility. The single point of fragility is the SEC licence itself — if the Commission revoked licence 34-12025 or restructured the market data revenue-sharing rules that tie tape records to licensed vendors, the matching engine would lose its legal authority to produce settled trades, the tape would stop, and the data business that sits on top of it would collapse with it.

How does this company make money?

NASDAQ charges a fee for every share traded on its platform, ranging from $0.0005 to $0.003 per share depending on whether the trader is adding or removing liquidity. Companies pay an annual listing fee between $27,500 and $155,000 depending on their size, just to keep their stock trading on the exchange. Financial firms — banks, hedge funds, data providers — pay ongoing subscription fees to receive the stream of trade data that NASDAQ produces and distributes through SIAC.

What makes this company hard to replace?

Market makers have already paid to install their own servers inside the Carteret data centre, and moving that physical equipment to a rival venue means losing their speed advantage and rebuilding from scratch. Companies listed on NASDAQ face a formal SEC delisting process and need shareholder approval before they can move to another exchange. Index providers like MSCI have written NASDAQ-listed stock identifiers directly into fund legal documents called prospectuses, and changing those identifiers requires regulatory approval — making a switch slow and expensive even when a firm wants to move.

What limits this company?

The Carteret, New Jersey data centre only has so many server racks. High-frequency market makers — the firms that post continuous buy and sell quotes, which keeps prices competitive for ordinary investors — need their computers physically close to the INET matching engine to get the fastest possible order response times. Once all the racks are full, no more of those firms can join, which caps how deep and liquid the market can become.

What does this company depend on?

NASDAQ cannot operate without five things: SEC exchange operator licence 34-12025, which is the legal permission to run a stock exchange at all; the INET electronic trading platform, which does the actual order matching; the Carteret, New Jersey data centre facility, which physically houses the matching engine and co-location servers; SIAC, the consolidated tape processor that carries every trade record out to data vendors; and DTCC, the settlement network that turns a matched trade into a final, legally binding transaction.

Who depends on this company?

Vanguard and BlackRock ETF market makers use NASDAQ's real-time prices to spot and close gaps between an ETF's price and the value of the stocks inside it — without NASDAQ, they could not do that during market hours. Charles Schwab and other retail brokers route customer stock orders through NASDAQ during the trading session; if NASDAQ stopped, those orders could not be filled. The S&P 500 index itself would become incomplete, because it includes major technology companies listed on NASDAQ, and their prices would be missing from the calculation.

How does this company scale?

Adding more listed companies or more daily trading volume costs NASDAQ very little extra — the INET matching engine and data distribution infrastructure handle more activity without needing to be rebuilt. What does not scale easily is physical space: adding rack capacity in the Carteret data centre requires construction, and opening any new trading venue requires its own SEC oversight and regulatory approval process.

What external forces can significantly affect this company?

The SEC's Regulation NMS rules require brokers to find the best available price for customers, which can push order flow away from NASDAQ if a rival venue offers a better price at that moment. European GDPR data protection rules restrict how NASDAQ can send market data across borders to institutional clients in the EU. When the Federal Reserve raises interest rates, fewer companies pursue IPOs, which shrinks the pipeline of new listings and the annual fees that come with them.

Where is this company structurally vulnerable?

If the SEC rewrote Regulation NMS to cut the revenue-sharing link between exchange tape records and data vendors, or changed S&P 500 inclusion rules so that listing on the NASDAQ Global Select Market no longer helped a company qualify, the whole chain would snap. Fewer companies would have a reason to list on NASDAQ, ETF order flow from Vanguard and BlackRock would scatter, the tape would thin out, and the data licensing revenue that depends on that tape would fall with it.