NASDAQ though called an exchange works in method called double action whereby the highest bidder buyer competes with all other buyers and the same thing happens for the sellers. NASDAQ as an exchange is not very old but has been giving good competition to the established exchange like the NYSE. As it happens in real world the borker or the dealer is assumed to have soem shares as well as some cash. So when the order comes up for fulfillment each broker isassumed to have an inventory whihc will need to be cleared at various prices. This is similar in the real world when you need to buy something you visit shop to shop. As an example I will show how a limit order works and how a market order works. Limit means that you impose a limit on the price you are willing to pay for the stock. In the market order you are willing to pay any price which is currently in the market. For example if you need to buy 1000 shares then the dealer will give 500 shares at a price you quoted but the next 500 shares you will get at a price which can be anything based on the price the dealer procures the additional shares for you. Market makers is the term used in NASDAQ. Market maker is a person who sells and buys shares and they keep on postinmg both bid and ask prices. You can also have access to these bid offers via a system called the SOES which is Small Order Execution System In conclusion, NASDAQ seems to favor the small investor like you and me for trading and that is all that matters in the stock trading arena.However there are other exchnages which can help really really small investor with special deals and cash only options like the American Exchange. If you need to trade in penny stocks then what you need is trading in OTCBB. But be careful as penny stock trading is very risky and volatile.
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