Wednesday, February 07, 2001

At 30, Nasdaq a little bruised, but still standing

From a distant No. 2 to legitimate NYSE competitor

By Amy Baldwin
The Associated Press

        NEW YORK — The Nasdaq Stock Market, the self-named “stock market for the next hundred years,” turns 30 this week, boasting of its past success and touting its plans for the future. But the market that pioneered electronic trading is also struggling with the issues of today.

        A year ago, the Nasdaq was basking in an 86 percent surge in its composite index during 1999. Now it's smarting from its worst annual performance ever in 2000, when the technology-dominated composite dropped more than 50 percent from its record close of 5,048.62 and lost some of its glamour along the way.

        The Nasdaq market thinks it has much to celebrate, including plans to separate from its parent, the National Association of Securities Dealers, the opening of Nasdaq markets in Europe and Japan and its ability to hang onto its biggest companies, including Microsoft and Intel.

        But “every stock on the NYSE is trading in decimals, and we're still waiting on the Nasdaq,” said Patrick Healy, a former Nasdaq official who now owns Issuer Network, a Chevy Chase, Md., business that advises companies on market issues. “They market themselves as the technology market, but it looks like the New York Stock Exchange has the better technology.”

It's come a long way

        Nasdaq officials say that the criticism isn't warranted, and that their market — which has more stocks and smaller companies — can't be compared to the NYSE. Instead, they point to their achievements — the way the Nasdaq has revolutionized investing and the industry.

        “When you think of all those (companies) that changed our lives in the last 25 years, you will find most of those companies are on the Nasdaq,” said Hardwick “Wick” Simmons, who on Feb. 1 became Nasdaq's new CEO.

        The Nasdaq has come a long way, Mr. Simmons said, since its Feb. 8, 1971, start as a “junk pile” for thinly traded, highly volatile stocks previously listed on the over-the-counter market.

        Outside observers agree that since its founding as an electronic, dealer-run market specializing in smaller, younger company stocks, Nasdaq has grown from a distant No.2 to a worthy competitor to the NYSE.

        The number of companies traded on the Nasdaq — short for National Association of Securities Dealers Automated Quotation System — has doubled since 1971 to about 5,000, higher than the 3,500 stocks traded on the NYSE.

Not too shabby
        The Nasdaq composite also has enjoyed huge growth as the world's dependence on computers, cell phones and the Internet increased. Considering that the composite started 30 years ago at 100 and took nine years to break 200, last year's close of 2,470.52, although a big disappointment to today's traders, does not look all that shabby.

        Industry experts credit the Nasdaq with creating a trading place for newer, less capitalized companies to grow when the NYSE rejected them for being too puny.

        Many of those companies, including giants like Microsoft and Intel, have stayed with the Nasdaq although the NYSE would now welcome them.

        Still, those accomplishments haven't been enough to distract Nasdaq from its shortcomings, including a Securities and Exchange Commission study that showed investors pay more to trade on the Nasdaq than on the NYSE.

        But Nasdaq officials remain optimistic about its future. Nasdaq is positioning itself to go public, which is fitting, officials say, given what the Nasdaq has done for investing in America.

        “(Nasdaq) has created an entrepreneurial class, a venture capital class that we didn't have years ago,” said Nasdaq Chairman Frank Zarb. “It's been an engine for growth and creating jobs.”


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