The Vertical Structure of the Nasdaq Stock

Exchange
1. Introduction
In the following topics I will present my personal assignment on the Stock Exchange Market, I
will focus on one of the largest companies in the Stock Market called the National Association of
Securities Dealers Automated Quotations (NASDAQ), first I would like to explain the
company's background, Vision, Mission, and Goals. Second, I will explore the vertical structure
of the NASDAQ Stock Exchange, emphasizing Authority in the Organization, Hierarchical
levels, the span of control, the delegation of power, responsibility, authority, accountability, and
decentralization.

1.1 Background
The Nasdaq Stock Market, or simply Nasdaq, is the second-largest stock exchange in the world
for investors looking to buy and sell shares of stock. Nasdaq was initially an acronym,
NASDAQ,
In its first humble year of operation in 1971, the Nasdaq Stock Market was broadcast to some
500 market makers across the country, trading nearly two billion shares in about 2,500 securities.
The index average at the close of 1971 was just over 100. Nasdaq desktop devices were
cathode-ray terminals that provided quotes, market-maker identification numbers, or IDs, and the
names of stocks. But little else.

Gordon Macklin, who was president of the National Association of Securities Dealers from 1970
to 1987, recalls those early devices.

"It was an absolute miracle to be able to push a button and pull up on the screen everyone from
all over the country, and all of their current bids and offers," he said.

"It was state of the art, at the time," Macklin added, "just a huge leap forward. Coming from over
the counter to over the computer, even in its most primitive stages, was a thrilling lifetime
experience." The OTC market he referred to was, of course, the market for stocks listed on pink
sheets and traded manually.

Macklin recalls the shortcomings as well as the benefits.

"The system was programmed so that instead of publishing the absolute best bid and the absolute
lowest offering price, it published what was known as the representative bid along with the
representative markup," he explained.

"That obviously left room for dealers to make profits on their retail sales of these securities," he
added. "Nonetheless, we weren't unhappy with the system because it was so vastly superior to
anything the market had ever seen before."

Rivalry

The world's first screen-based exchange has since grown to rival in terms of average daily
trading volume the floor-based New York Stock Exchange. Nasdaq is arguably the most liquid
electronic trading environment in the world.

Nasdaq broadcasts to nearly half-a-million international brokers and dealers trading more than
5,100 stocks, with a 1998 total volume of more than 200 billion shares, and a press-time closing
index value of 2408.17

Today's proprietary Nasdaq network features Unisys 4800 mainframes, which provide stock
quotes; Tandem Himalaya K20,000 processors for running Nasdaq's Small Order Execution
System (SOES) and SelectNet trading systems; and desktop Pentium II PCs with Windows 95
and Microsoft NT operating systems. Nasdaq's network backbone features a quarter-of-a-million
miles of leased lines provided by MCI Worldcom. The network's main computer hub is in
Trumbull, Conn. Backup facilities are in Rockville, Md.

According to a Nasdaq mission statement, the exchange's goal is "to facilitate capital formation
in the public and private sector by developing, operating and regulating the most liquid, efficient
and fair securities market for the ultimate benefit and protection of the investor."

Few would argue the question of its liquidity. But in terms of efficiency, some say work done to
enhance Nasdaq's core information-technology infrastructure has been slow in coming,
particularly for an entity that is so reliant on its technology infrastructure.

For example, says Leonard Hefter, senior vice president in charge of Nasdaq trading for Los
Angeles-based Jefferies & Company, "Nasdaq is now trying to upgrade its system to handle
increased volumes, provide faster updates, and report trades more quickly. But I think a lot more
has to be done in that area, especially during high volume times of the day."
For instance, Hefter added, at the opening, "we see lots of delays in Nasdaq time and sales,
which is unfortunate. The new PCs are fine in terms of features and functions. The only thing
Nasdaq has to do now provides more speed and fewer delays." To that end, Nasdaq is currently
working on a five-year, $600 million upgrade of its wide-area network.

As for Nasdaq's pledge to become the fairest securities market, a combination of federal
regulatory and technological enhancements, such as new trade-monitoring tools, have helped
move the exchange closer to the goal.

For example, Macklin says, 1982 federal regulations that made timely trade reporting mandatory
have helped place tighter control on the burgeoning market. "When we put the burden on the
market makers to report trades," Macklin said "there was great resistance because the new
obligation to report within 90 seconds took a lot more staff and added to their costs. Plus, to
some extent, they disclosed what they were trying to do."

On the other hand, he added, when that data started coming out, it made Nasdaq stocks even
more popular and the exchange more prominent. "Now when you look at any major television
program about the markets," Macklin said, "you see the Dow Jones [Industrial Average] and the
Nasdaq [Composite Index] side by side. To get from where we were, as basically an electronic
bulletin board to the system as it exists today, with all of its wonderful enhancements, took a lot
of policy changes. And interestingly, we found that the more price information we offered, the
faster our volume grew."

Like the age-old quandary Which came first, the chicken or the egg? it's hard to say which has
led to which: Nasdaq's technological developments or changing regulatory requirements. In fact,
the two have evolved in tandem over the years. For instance, the SOES system, introduced in
1984, has frequently been the subject of regulatory scrutiny. Said Macklin: "We thought [SOES]
would enable our dealers to get small orders sent automatically, thereby reducing their handling
costs. But many dealers felt that if they left their markets vulnerable to everyone on Nasdaq,
they'd get lots of abuse. And they did."

As markets became more volatile and hotter stocks became the stocks du jour, which put the
dealers at even greater risk. "Apparently neither the Securities and Exchange Commission nor
the NASD was able to restrict that system to its original purpose and consequently, SOES
became a sort of day-trading vehicle. I think it was a wonderful idea that went astray," Macklin
said.

However, since those early days, Macklin says technological and regulatory developments have
helped bridge the credibility gap in Nasdaq's systems and practices.
As for the future, Nasdaq mavens like Hefter and Macklin predict that a confluence of regulatory
and systems developments is likely to continue. These developments include the recent
integration of Nasdaq and the American Stock Exchange, and a gradual shift towards utilizing
the Internet, particularly for market data and perhaps even for full-fledged market making.

These and more will redefine Nasdaq trading terminals in the years ahead.

"As long as [Nasdaq's] systems are functional and there are no delays, they're fine," Hefter said.
But he thinks Nasdaq must improve the ability of its systems to accept and send orders. Nasdaq
must also take a definitive step to make SOES and SelectNet either separate or integrated
systems. "At some point, the Internet will play a [larger] part," he added. (Nasdaq's so-called
agency-quote proposal aims to integrate SOES and SelectNet into one system, while Nasdaq is
using the web for publishing price quotes on a 15-minute delayed basis.

(www.nasdaq.com)

1.2 Vision
We aim to set the pace for rethinking capital markets and economies anywhere and everywhere.
(www.nasdaq.com)

1.3 Mission
As the world's largest exchange company, Nasdaq is driven to deliver multi-asset, multi-service
capability across every central continent. Nasdaq provides forward-thinking services and
technology that have the power to drive capital formation, transform business, and fuel economic
growth around the world.(www.nasdaq.com)

1.4 Goals
At Nasdaq, our purpose is to champion economic progress for all. We power stronger economies,
create more equitable opportunities and contribute to a more sustainable world to help our
communities, clients, employees, and people of all backgrounds reach their full potential.
(www.nasdaq.com)

2. Authority in the organization

Authority is the legitimate right to make decisions and to tell other people what they can or
cannot do. Authority is related to the position or the level in your workplace.
The decision-making power of the NASDAQ Corporation depends on the organization's
management level, and each level has specific authority and responsibilities. In the following
subtopics, I highlight the power of NASDAQ's board, executives, and senior leadership support.

2.1 Board of directors

The board, led by the chair, makes major decisions affecting the organization, subject to the
corporate charter and bylaw provisions. Boards perform at least three major sets of duties: (1)
selecting, assessing, rewarding, and perhaps replacing the CEO; (2) determining the firm’s
strategic direction and reviewing financial performance; and (3) ensuring ethical, socially
responsible, and legal conduct.
The NASDAQ Board oversees the strategic direction of Nasdaq and the business performance
and governance of the organization. Nasdaq's directors represent various backgrounds,
experiences, leadership, and skills that strengthen knowledge related to Nasdaq's long-term
strategic vision and global operations.

2.2 Chief executives officers (CEOs)

The authority officially vested in the board of directors is assigned to a chief executive officer
(CEO), who occupies the top of the organizational pyramid. The CEO is personally accountable
to the board and to the owners for the organization’s performance.
The Nasdaq executives are at the forefront of corporate strategy, technology advocacy, and
market innovation to transform global markets and economies.

2.3 Top management team

Increasingly, CEOs share their authority with other key members of the top management team or
C-suite (the “C” stands for Chief). Top management teams typically are composed of the CEO,
president, chief operating officer, chief financial officer, chief human resources officer, and other
key executives.
The Nasdaq's senior leaders support the company executive team by executing strategic
initiatives and creating exciting client growth opportunities.

3. Hierarchical levels
The term corporate hierarchy refers to the arrangement and organization of individuals within a
corporation according to power, status, and job function. In general, a hierarchy is any system or
organization in which people or groups are ranked one above the other according to status or
authority.
3.1 Organizational Hierarchs
The highest management level of Nasdaq is the board of directors, they determine and maintain
the strategic goals, they sign all the rules and regulations of the organization, and they focus on
the future of the organization.

In addition, chief executive officers (CEOs) are the second-level management from top to
bottom, they are strategic managers who are responsible for the entire organization. A key
responsibility of CEOs in corporate governance is to ensure that the organization's activities are
able to achieve the goals of the organization's stakeholders.

Finally, Nasdaq's senior leadership support team is the operational level managers of the
organization, carrying out day-to-day activities and operations to achieve the organization's
objectives

3.2 Market Hierarchs

By running 25 markets, a clearinghouse, and 5 central depositories for securities, NASDAQ has
a definite market structure that explains the functioning of the company altogether.
The market structure of NASDAQ consists of 3 tiers that are as follows:-

3.2.1 Capital Market

The market for companies that have small market capitalizations, the Capital Market is the
easiest in terms of criteria that a firm has to pass in order to get listed.
Earlier termed to be the 'SmallCap' Market, this market got its present name - Capital Market
when the company began with the restructuring process. One of the 3 tiers, the Capital Market
requires every company that wishes to be listed to follow a set of 3 standards.
However, it is mandatory to fulfill any one of the NASDAQ Capital Market listing requirements.
Firstly, a company should have at least 4-5 million worth of stockholders' equity. Secondly, a
company must hold unrestricted public shares of 1 million.
Thirdly, a company must have a daily average of a minimum of 2,000 shares and this record
should be held prior to 30 trading days before the listing begins.
As compared to the other 2 tiers of NASDAQ, this tier particularly deals with less strict
regulations and requirements.

3.2.2 Global Market

The NASDAQ Global Market Index is the second tier of NASDAQ's market structure that
consists of companies that have a moderate market capitalization.
With over 1400 companies currently listed on its chart, the NASDAQ Global Market has stricter
rules as compared to the Global Select Market and Capital Market.
These are to be followed by companies that aim to be listed. With a 'mid-cap' portfolio, the
companies that cannot be listed in the NASDAQ Global Select Market are included in the Global
Market.
A set of rules are to be followed in terms of financial capability and liquidity in order to get
listed as a NASDAQ Global Market company.

3.2.3 Global Select Market

The Global Select is the third tier of the NASDAQ market and has the most stringent criteria to
be followed in order for companies to get listed on the NASDAQ chart.

Listing the companies that have the largest capitalization among all companies, the Global Select
Market is the most exclusive equity market where stocks are bought and sold.
Top-tier companies that already exist in the Global Market are promoted and listed in the Global
Select Market. Even those companies that are part of the Capital Market can be projected among
Global Select Market companies if they pass the criteria and have progressively excelled.
What's more, the companies listed in the NASDAQ 100 list are automatically listed in the Global
Select Market which provides extraordinary perks to the companies.

4. Span of control
The number of people under a manager is an important feature of an organization’s structure.
The number of subordinates who report directly to an executive or supervisor is called the span
of control. The implications of differences in the span of control for the shape of an organization
are straightforward.
The Nasdaq has a large span of control due to the too-wide size of the company. The Board of
Directors has 10 members, including the President of Nasdaq, and he/she is a chair of the
directors. All other board members are reporting to the Chairperson of the Nasdaq Stock
Exchange corporate.
Furthermore, the Nasdaq Executives are 15 Officers, they consist of the President and Chief
Executive Officer of Nasdaq and Executive Vice Presidents and Chiefs of other department
Officers at Nasdaq, such as the Chief Financial Officer, chief technology, and Executive Vice
President of North American markets at Nasdaq and so on. Each one reports to the CEO.
In conclusion, the Nasdaq senior leadership support team is 41 people. They report to different
Executives and departments. As well as, they work in different geographical areas.
5. Delegation
Delegation is the assignment of authority and responsibility to a subordinate at a lower level. It
often requires the subordinate to report back to his or her boss about how effectively the
assignment was carried out. Delegation is perhaps the most fundamental feature of management
because it entails getting work done through others. Thus delegation is important at all
hierarchical levels. The process can occur between any two individuals in any type of structure
with regard to any task.
The Nasdaq Board of Directors delegates to the Executives all management functions of the
Company. The board mandates the CEO to ensure the organization's strategic goals and
objectives.
Also, the chief executive officer (CEO) breaks down the organization's goals into objectives and
assigns his executive vice presidents to accomplish strategic goals as well as, and all executive
members report back to the CEO.
Nasdaq Operations Managers conduct company operations and day-to-day tasks to achieve
institutional standards. Nasdaq's senior leadership support team sends regular reports and
feedback to the department's executive chairman or vice president.

6. Responsibility, authority, and accountability

When delegating work, it is helpful to keep in mind the important distinctions among the
concepts of authority, responsibility, and accountability.

6.1 Responsibility
Responsibility is defined as the assignment of a task that an employee is supposed to carry out.
When delegating work responsibilities, the manager also should delegate to the subordinate
enough authority to get the job done. Authority, recall, means that the person has the power and
the right to make decisions, give orders, draw on resources, and do whatever else is necessary to
fulfill the responsibility.
The Nasdaq Corporation management levels have different responsibilities, for instance, the
board has responsibility for overseeing the strategic goals of the Nasdaq Stock Exchange. The
Executives are responsible for implementing the company objectives and goals in the short and
long term. At the same time, Operational managers or the Executive support team has
responsible daily activities and operations of Nasdaq.

6.2 Authority
Authority is defined to mean that a person has the power and the right to make decisions, give
orders, draw on resources, and do whatever is necessary to fulfill their responsibility.
The Nasdaq board of directors has the authority to determine the strategic goals as well as, the
power to sign all the rules and regulations of the organization and make decisions about the
future of the organization.
The executives have the authority to lead the whole organization's departments and determine the
organizational strategic plan, also The executive's support team has less power according to
upper levels of management but still, they have the authority to implement the operational plan.

6.3 Accountability
Accountability refers to the expectation by managers of employees or subordinates to perform
their job, take corrective action whenever necessary, and report on the status and quality of their
performance to the manager or their superior.
Nasdaq Operations Managers are accountable to their executive managers for reporting on the
progress of operations. Also, the Executive Team is accountable to the board of directors and
Nasdaq Managers remain responsible and accountable not only for their own actions but also for
the actions of their subordinates.

7. Decentralization
In a decentralized organization, the lower-level managers will make decisions as well as carry
out the activities in the organization. The delegation of responsibility and authority decentralizes
decision-making. In a centralized organization, important decisions usually are made at the top.
In decentralized organizations, more decisions are made at lower levels. Ideally, decision-making
occurs at the level of the people who are most directly affected and have the most intimate
knowledge about the problem.
The Nasdaq has a Decentralized structure, and some executives have autonomous power to fulfill
their duties. For example, the President of European Markets and Executive Vice President of
North American Markets at Nasdaq have full authority to lead that market.