In 1961, the Security and Exchange Commision (SEC) was authorized to find out why there was fragmentation in trading in Over-The-Counter(OTC) stocks. The SEC commisioned the National Association of Securities Dealers (NASD) to find out if process automation would help the execution of the trades.
In 1971, The National Association of Securities Dealers (NASD) founded the National Association of Securities Dealers Automated Quotations, or NASDAQ. The NASDAQ was an exchange for OTC securities, but all trading was done completely electronically. At first however, the NASDAQ was a bulletin board-type of system - no actual trading took place between buyers and sellers. The NASDAQ helped even the odds for traders by narrowing the spread between the bid and ask prices. Brokerage firms did not like this because they would earn a higher commision under the old rules of business.
NASDAQ merged with the American Stock Exchange in 1998 to form the NASDAQ-Amex Market Group. The NASDAQ-AMEX became the largest electronic stock market in the United States in both number of shares traded and volume generated.
The NASDAQ will probably be associated with the "Dot Com" Internet Bubble for decades to come - Since the NASDAQ is made up of technology stocks, that gave way to a fantastic rise and fall of the entire market, lead by the technology issues, with names like Microsoft, Oracle, and Cisco leading the charge.
The Nasdaq Stock Exchange 1995 - 2010
By 2001, and through a series of transactions, the Norwiegan exchange, OMX, purchased the NASDAQ, known now as the NASDAQ-OMX Group, and helped the NASDAQ become the second largest stock exchange in the US, and the fourth largest stock exchange in the world. The NASDAQ-OMX Group operates the NASDAQ exchange in New York. By 2002, the OMX Group issued stock for the NASDAQ (symbol: NDAQ).
The NASDAQ became its own regulatory organization, allowing it to be a securities exchange, and self-regulating entity, setting its own rules and regulations for participants.