* The name was originally an acronym for National Association of Securities Dealers Automated Quotation System.

† Nasdaq dealers acted as middlemen, matching buyers and sellers or filling orders from their own inventory. Given the low volumes typical in the over-the-counter Nasdaq stock market, the market makers were essential to provide grease to the wheels, so to speak, “making markets” in securities that otherwise would have been difficult to trade. As compensation, they generally took a small cut for their service out of the “spread” (or difference) between the “bid” (price a buyer is willing to pay) and the “ask” (price a seller is willing to take).

* The exception here was in lower-volume markets, where there is very little likelihood of getting simultaneous buy and sell interest. High-volume stocks are perfectly suited to electronic trading networks. But low-volume stocks, which tend to be illiquid, require greater hands-on assistance to function efficiently. In these cases, middlemen can play a critical role in facilitating trading.

* A well-functioning stock market doesn’t just facilitate trading of any given equity; it also helps determine its price. If you want to know the true price of any asset, the best method is an auction-style interaction, where a group of buyers and sellers all come together in one place and enter bids and offers, until eventually a price prevails. However, that type of auction is dependent upon sufficient volume—there has to be enough activity to arrive at a legitimate price. If there are only two or three people in the auction, you’ll never get a trustworthy accounting. It’s the same with stocks.

* Technically, the SEC and FINRA—the financial regulatory authority that grew out of the combined regulatory arms of both NYSE and Nasdaq—were overseeing these institutions, but the SEC played the primary role.

* I attempted to lay out my concerns in a Wall Street Journal op-ed published December 8, 2004. Titled “Millions of Momentary Monopolies,” the piece explained to the public why mandating “best price” might sound good in theory but in reality could create problems—as it did, in the long run.

* In short selling, an investor borrows a stock from an owner (paying a nominal fee) and sells it for a profit. If it then goes down in price, the investor buys it back and returns it to the original owner. The difference between the price earned from selling it at a higher price and buying it at a lower one is the profit earned on the short sale.