Lida NO (Mr.) MA Candidate in International Trade and Finance Yonsei University, GSIS 1

Contents I. NASDAQ 1.1. Background 1.2. Trading Method 1.3. NASDAQ Indexes II.KOSDAQ 2.1. Background 2.2. Trading Method 2.3. KOSDAQ Indexes 2

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1. NASDAQ 1.1 Background NASDAQ: National Association of Securities Dealers Automated Quotations Found in 1971, wholly owned subsidiary of the National Association of Securities Dealers (NASD) under the oversight of the Securities and Exchange Commission (SEC). The largest OTC market in the United States which is fully computerized There are approximately 3,200 listed companies from 37 countries and across all industries. 4

1. NASDAQ (Cont.) There are two broad tiers of securities in NASDAQ market: NASDAQ National Market (NNM) o Dominant OTC market in the United States o Approximately 3,600 stocks traded o Lower listing requirement than NYSE; thus, attracts smaller companies Small Capitalization Market (SCM) o Approximately 800 stocks traded o Less stringent listing requirement in term of financial criteria than NNM 5

1. NASDAQ (Cont.) Trading Method NASDAQ is a quote-driven market or dealer market Relies on market makers to facilitate trading and liquidity of stocks A market maker posts buy and sell price trying to attract orders Multiple market makers competing for the order which drives the transaction cost down Trading time composes of regular, pre- and after-hours sessions

1. NASDAQ (Cont.) 1.3. NASDAQ Index NASDAQ Composite Index The NASDAQ Composite Index measures all NASDAQ domestic and international based common type stocks listed on The NASDAQ Stock Market. Because it is so broad-based, the Composite is one of the most widely followed and quoted major market indexes. NASDAQ 100 Index The NASDAQ-100 Index includes 100 of the largest domestic and international non-financial securities listed on The NASDAQ Stock Market based on market capitalization. NASDAQ Biotechnology Index The NASDAQ Biotechnology Index is calculated under a modified capitalization-weighted methodology. 7

1. NASDAQ (Cont.) Other NASDAQ Index: NASDAQ National Market Composition Index NASDAQ 100 Equal Weighted Index NASDAQ 100 Ex-Tech Sector Index NASDAQ Financial 100 Index NASDAQ Biotechnology Equal Weighted Index NASDAQ Bank Index NASDAQ Computer Index NASDAQ Health Care Index NASDAQ Industrial Index NASDAQ National Market Industrial Index NASDAQ Insurance Index NASDAQ Telecommunication Index NASDAQ Transportation Index 8

1. NASDAQ (Cont.) NASDAQ Composite Index 9 Source:

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2.1 Background KOSDAQ: Korean Securities Dealers Automated Quotations Korea Exchange’s global market for young, small companies. First Established as an independent stock market in July1996 In January 2005, consolidated with Korea Stock Exchange and Korea Future Exchange to form the Korea Exchange (KRX) There are 1029 listed companies as per February 19, KOSDAQ

 Market Integration KOSDAQ (Cont.)  Manufacturing, Finance  Main Board for large firms  Derivatives products  Futures, Options  IT, BT, Venture firms  Minor Board for SME

13 Organization of Korea Exchange (KRX) 2. KOSDAQ (Cont.)

14 2. KOSDAQ (Cont.) 2.2. Trading Method Fully automated order-driven market or auction market Both call and continuous auctions Trade Execution Priority: price, time priority and customer priority Daily price change limit is 15% of the base price Trading time composes of regular, pre- and after-hours sessions Quote Receipt After-hour Session Continuous Auction Call Auction (opening price) Regular Session 07:30 08:30 09:00 14:50 15:00 15:10 18:00 Opening Closing Opening Closing Opening Closing Pre-hour Session Call Auction (closing price)

15 2. KOSDAQ (Cont.) 2.3. KOSDAQ Index KOSDAQ Composite Index is a market capitalization weighted index of listed companies on KOSDAQ market. The index is calculated with a base index of 1000 set to July 1, KOSDAQ Index = (Current market capitalization/Market capitalization on July 1,1996)x1000 Source:

16 2. KOSDAQ (Cont.) Other KOSDAQ Index: KOSDAQ 100 KOSDAQ mid 300 KOSDAQ Small KOSDAQ Venture KOSDAQ IT KOSDAQ IT Venture KOSDAQ 50 KOSDAQ IT 50

17 Thank You!