Introduction:

NASDAQ is short for National Association of Securities Dealers Automated Quotations, the entity which founded the NASDAQ as a way to increase trading in over the counter stocks, which were not able to meet the requirements to have their stocks listed on larger exchanges such as the NYSE. These over the counter stocks were previously traded over the phone, and because information on the stock had to be obtained from a dealer who specialized in the stock directly, it was difficult for the public to trade these stocks. The NASDAQ exchange was thus founded in 1971 giving dealers the ability to post their quotes electronically, and therefore streamlining the process and opening up trading in these stocks to a much wider audience.

The new market was an instant hit, and in 1975 the NASDAQ released its own listing requirements, essentially separating out larger companies from the smaller over the counter companies it had been trading up to that point, and putting it on the path to compete with larger exchanges such as the New York Stock Exchange. While the NYSE is the largest stock exchange by market capitalization, the success of the NASDAQ's all electronic model has allowed it to grow to be the largest exchange by trading volume.

Definition of NASDAQ:
A computerized system that facilitates trading and provides price quotations on more than 5,000 of the more actively traded over the counter stocks. Created in 1971, the NASDAQ was the world's first electronic stock market.

Stocks on the NASDAQ are traditionally listed under four or five letter ticker symbols. If the company is a transfer from the New York Stock Exchange, the symbol may be comprised of three letters.

History of the NASDAQ:

The NASDAQ was developed in 1971 as the first electronic stock exchange in the world. It was created as a means to increase the trading of Over-the-Counter stocks, those that were unable to meet listing requirements for larger exchanges. 2,500 OTC stocks were traded on the NASDAQ's first trading day, February 8, 1971. When the NASDAQ stock exchange began trading on February 8, 1971, it was the world's first electronic stock market. At first, it was merely a computer bulletin board system and did not actually connect buyers and sellers. The NASDAQ helped lower the spread (the difference between the bid price and the ask price of the stock) but somewhat paradoxically was unpopular among brokerages because they made much of their money on the spread. Over the years, NASDAQ became more of a stock market by adding trade and volume reporting and automated trading systems. NASDAQ was also the first stock market in the United States to start trading online. Nobody before them had ever done this, highlighting NASDAQ-traded companies (usually in technology) and closing with the declaration that NASDAQ is "the stock market for the next hundred years." Its main index is the NASDAQ Composite, which has been published since its inception. However, its exchange-traded fund tracks the large-cap NASDAQ100 index, which was introduced in 1985 alongside the NASDAQ 100 Financial Index. The division between the NASDAQ National Market and the NASDAQ Small-Cap Market developed from 1982 to 1986, as the larger companies separated themselves from the smaller

ones. It was in the 1990's that the NASDAQ began to be seen as a competitor of the NYSE, and in 1994 the NASDAQ beat the NYSE in annual shares traded. In 1998, the NASDAQ merged with the American Stock Exchange, which mostly traded options and derivatives, creating the NASDAQ-AMEX Market Group. The combined company still operates as two separate exchanges, but is better able to compete with the NYSE. In February, 2011, in the wake of an announced merger of NYSE Euro next with Deutsche Bores, speculation developed that NASDAQ and InterContinental Exchange (ICE) could mount a counter-bid of their own for NYSE. NASDAQ could be looking to acquire the American exchange's cash equities business, ICE the derivatives business. As of the time of the speculation, "NYSE Euro nexts market value was $9.75 billion. NASDAQ was valued at $5.78 billion, while ICE was valued at $9.45 billion. Late in the month, NASDAQ was reported to be considering asking either ICE or the Chicago Merc to join in what would probably have to be, if it proceeded, an $1112 billion counterbid.

Company listed in NASDAQ: It delivers trading, exchange technology and public company services across six continents, with more than 3600 listed companies. Top 10 Performing Stocks for NASDAQ: Year-to-date as of 2/23/12 Company Sears Holdings Corporation Illumina, Inc. (ILMN) Seagate Technology PLC (STX) Netflix, Inc. (NFLX) Green Mountain Coffee (GMCR) CA, Inc. (CA) Apple Inc. (AAPL) Flextronics International Ltd. (FLEX) Broadcom Corporation (BRCM) Autodesk, Inc. Closing Price 12/30/11 31.78 30.48 16.24 69.29 44.85 20.03 405 5.66 Closing Price 2/23/2012 61.8 51.29 27.11 112.99 67.62 26.92 516.39 7.21 % change +94.46% +68.27% +66.93% +63.07% +50.77% +34.40% +27.50% +27.39%

29.28 30.33

37 38.2

+26.37% +25.95%

Split and dividend adjusted price - source: Yahoo Finance

Scenario of Capital Market in Bangladesh:

Meaning of Capital Market the capital market is market for securities, where companies and Governments can raise long-term funds. It is a market in which money is lent for periods longer than a year. The capital market includes the stock market and the bond market. Capital market is the group of interrelated markets, in which capital in financial form is lend or borrowed for medium and long term and, in cases such as equities, for unspecified periods. The Dhaka stock exchange (DSE) was setup on 28th April, 1954 that started formal trading on early 1956. Post independence government did not promote a capital market during the first five years, and it was activated again in 1976 with 9 issues on board. The Chittagong stock exchange(CSE) began its journey in 10th October of 1995 from Chittagong City through the cry-out trading system with the promise to create a state of-the art bourse in the country. CSE was formally opened by then Hon'ble Prime Minister of Bangladesh on November 4, 1995

General feature of the capital markets in Bangladesh:

The capital market in Bangladesh is still at a developing stage. But, there was a steady progress in the capital market in the past due mainly to the governments continuous efforts to develop a sound securities market. As statistics shown that , there had been continuous development of the capital market over the years. As of the end of 2007, there were 350 securities listed on the Dhaka Stock Exchange with a market capitalization of US$ 10.82 billion. The average growth of market capitalization had been 34.8 percent per annum over the last 10 years. The transaction volume also increased significantly with an average growth rate of 28.5 percent during the same period. The average size of companies in Bangladesh is very small compared to those of other countries. The company had an average issued capital of only Taka 331 million in 2007. Owing to the tiny size of companies, shares are concentrated in a few hands within a few years after becoming public. This is the main reason for thin trading and infrequent trading of stocks of some companies. The foreign portfolio investment in Bangladesh capital market is insignificant. In the 1990s, there had been some foreign portfolio investment. Much of these investments were made in private placement of new issues. However, in subsequent years, these investments were

mostly withdrawn with the introduction of lock-in period for privately placed securities. While there is no official record of foreign portfolio investment in the capital market, an assessment of the Securities and Exchange Commission (SEC) indicates that the investment of foreign portfolio investors in Bangladesh is roughly 2.5 percent. The supply of new securities in the market had been small in Bangladesh. As presented in following Table, the number of new issues and the funds raised from the market were limited. During the past ten years, an average of 10 companies made public floatation of shares and raised funds of about Taka 2.77 billion per year. In spite of the efforts of the government to increase the supply of new floatation of shares, there were no conspicuous results. The major impediment to public offering of securities is with the attitude of entrepreneurs. It is widely believed that fear of losing control over the company still prevails among the entrepreneurs and sponsors. This prevents many entrepreneurs from floating shares in the market. Accordingly, as stated above, the controlling interest is retained for most of the publicly traded companies by the sponsor directors and their family members. The debt securities market is small. Government debt securities such as treasury bills, treasury bonds and national savings certificates (NSA) dominate the market, among which NSA account for roughly two-thirds. The corporate bond issues had been very occasional and had been stagnant due to a lack of varied corporate debt supply. This is because, in general, companies prefer to rely on banks for funds rather than on the bond market, thereby avoiding the need to comply with disclosure and governance norms. These imply that the capital market had not been effectively utilized as a vehicle for financing by companies.

Table: Capital raised in the capital market Year Number of initial issues Capital raised (Million Taka) S Corpor t ate o bonds c k s 1998 1999 2000 2001 2002 2003 5 10 7 11 8 14 1 1 0 0 0 0 6 11 7 11 8 14 302.10 975.00 422.85 572.20 450.20 2,952.6 7 2004 2005 3 18 0 0 3 18 588.04 2,310.5 0 2006 10 0 10 12,624. 0.00 83 2007 13 1 14 3,463.9 7
Source: DSE, CSE and SEC reports

Total

Stocks

Corpor ate bonds

Total

50.00 20.00 0.00 0.00 0.00 0.00

352.10 995.00 422.85 572.20 450.20 2,952.6 7

0.00 0.00

588.04 2,310.5 0 12,624. 83

3,000.0 6,463.9 0 7

Capital Market Securities:

Three common types of capital market securities are bonds, mortgages, and stocks. Capital market securities include equity, floating rate bonds, convertible bonds, asset backed securities, mortgage backed securities, interest rate swaps, treasury notes and bonds, Municipal bonds, and corporate bonds.

Bangladesh Capital Market Summary:

This issue of Bangladesh Economic Update discusses the continuous fall in the capital market of Bangladesh. Continuous decrease in the capital market has not only destabilized the entire capital market but also has dragged out a huge number of small investors from the market leaving behind their investments. The report is an assessment of the previous and recent downward trend in the capital market along with the initiatives taken by the government to address the downturn of the market. Suggestions to improve the activities of DSE to force the listed companies to publish their annual reports with actual and proper information that can ensure the interests of investors .To introduce automated monitoring system that may control price manipulation, malpractices and inside trading. To introduce full computerized system for settlement of transactions. to force the listed companies to declare and pay regular dividends through conducting Annual General Meeting To take remedial action against the issues of fake certificates. Banks, insurance companies and other financial institutions should be encouraged deal in share business directly. To punish the member brokers for breaching of contract.

Scenario of Money Market in Bangladesh:

Money Market an integral part of the financial market of a country . It provides a medium for the redistribution of short term loan able funds among financial institutions, which perform this function by selling these short term securities that usually are highly marketable. The money market in Bangladesh is in its transitional stage. The various constituent parts of it are in the process of formation, while continuous efforts are being made to develop appropriate and adequate instruments to be traded in the market. At present Money market instruments such as Government treasury bills of varying maturity, Bangladesh Bank Bills, Certificates of Deposits, Bankers Acceptance or L/C and Repos and Reverse etc in limited supply are available for trading in the market. However, the short-term credit market of the banking sector experienced a tremendous growth since in recent years, a total of about 6000 branches of the scheduled banks provided short-term credit throughout the country in the form of cash credit, overdraft and demand loan. The rates of interest are determined by the individual.

Overview of the Money Market:

The money market, like all financial markets, provides a channel for the exchange of financial assets for money. However, it differs from other parts of the financial system in its emphasis on loans to meet purely short-term cash needs (i.e., current account, rather capital account transaction).The money market is the mechanism through which holders of temporary cash surpluses meet holders of temporary cash deficits. It is designed, on the one hand, to meet the short term cash requirements of corporations, financial institutions, and governments, providing a mechanism for granting loans as short as overnight and along as one year to maturity. At the same time, the money market provides an investment outlet for those spending units (also principally corporations, financial institutions, and governments) that hold surplus cash for short periods of time and wish to earn at least some return on temporary idle funds. The essential function of the money market is to bring these two groups into contract to make borrowing and lending possible.

Money Market Participants:

It is usually well known that in money market there are two main participants: supplier and demander of money market securities. It is quite natural that participants in the money market acts both supplier and demander of loans and securities. Generally, the participants in money market are: i) individual ii) Business and iii) Government;

Present Scenario of Money Market Operations in Bangladesh:

A sound and well-functioning financial system helps mobilize savings, allocate resources, exert corporate control, facilitate risk management and ease trades and contracts by solving market frictions. Efforts have been continued in FY06 to establish a sound financial system in the country. Despite the stronger growth of some major macroeconomic indicators, Bangladesh economy faced some challenges originating from price hike of oil and petroleum products and some major imported commodities in the international market causing fluctuations in real sector and foreign exchange market in FY06. As a result, the financial market was a little bit volatile in the second half of FY06.Except this temporary fluctuation in the financial market, the overall market was sound functioning during FY06.With a view to establishing a healthy, sound, well functioning and dynamically evolving financial system, a series of reform measures were initiated in FY06.

Money market securities:

Money market securities are the debt securities that have a maturity one year or less. They generally have a relatively high degree of liquidity. Money market securities tend to have a low expected return but also a low degree of risk. Various types of money market securities are listed below: Treasury bills, short-term central bank and government bonds, negotiable certificates of deposits, bankers acceptances and commercial papers like the bills of exchange and promissory notes, mutual funds, federal funds and repurchase agreements.

Bangladesh Money Market Summary:

It has been rightly said that the capital market indicates how developed a nations economy is but without efficient money market it is impossible to sustain a strong and vibrant capital market in the long run. The NBFIs will play more important role in the upcoming future and with the advancement of time they will also face problems like fund shortage and so on but if they can develop some efficient instrument in the money market with the help of central bank where they can participate more appropriately, this will ultimately enrich both money market and HFCs of Bangladesh.