NASD stands for the National Association of Securities Dealers, a regulatory body for brokers and others engaged in selling financial securities in the United States. NASD operated from 1939 until 2007, when its functions were assumed by a new agency. NASDAQ was the original acronym for an electronic stock market created by the NASD.
NASD History
Established in 1939, the National Association of Securities Dealers grew to include nearly every seller of securities in the United States. Although NASD was a private, non-governmental body, the federal Securities and Exchange Commission gave it the authority to regulate "over-the-counter," or OTC, stock sales. OTC sales are those that don't take place through a stock exchange.
NASDAQ History
With no centralized exchange, OTC stock deals were difficult, to say the least. Buying stock essentially involved calling around trying to find someone who had shares to sell. There was no reliable way to know the current share price for an OTC stock, or what direction that price was moving. These problems led the NASD to establish a computerized market for OTC stocks in 1971. They called it the National Association of Securities Dealers Automated Quotations system, or NASDAQ.
NASDAQ Evolution
NASDAQ brought some semblance of order to OTC trades by automatically matching buyers and sellers, serving the same function as an exchange. This allowed stock sales to be tracked, which meant buyers and sellers alike could get reliable price quotes. In 2000, the NASD spun NASDAQ off as a separate, for-profit entity. To reflect that it was longer affiliated with the association, the name of the market ceased being an acronym and became a proper name: "Nasdaq." As of late 2010, the Nasdaq included about 2,900 stocks.
FINRA
In 2007, the NASD merged with the New York Stock Exchange's regulatory and enforcement divisions to create an entirely new body, the Financial Industry Regulatory Authority, or FINRA. This agency regulates the bulk of the U.S. securities industry under the supervision of the Securities and Exchange Commission. As of late 2010, FINRA had about 4,600 brokerages and dealerships as members and more than 630,000 registered "representatives," or individual brokers and dealers.
