The origins of the NASDAQ began in 1961, when Congress authorized the Securities and Exchange Commission to conduct a study of fragmentation in the over-the-counter market. The SEC proposed automation as a possible solution, and entrusted the National Association of Securities Dealers, with its execution. Launched on February 5, 1971 with a base value of 100 points, the NASDAQ Composite (which was the National Association of Securities Dealers Automated Quotations) is a broad based index which is calculated under a market capitalization weighted methodology that began trading with median quotes for 2,500 over-the-counter securities. As of 2009, the index has grown to include over 3,000 companies.

On July 17, 1995, the index closed above the 1,000 mark for the first time. The all-time low for the index had been reached in October 1974 around 54 points, representing a market drop of more than 45% from the time of its introduction. The decline in the index surrounded the overall negative mood revolving around the 1973–1974 Stock Market Crash along with it being aggravated by the Yom Kippur War and the 1973 Oil Crisis which followed it soon after. On March 10, 2000, the index peaked at an intra-day high of 5,132.52, and closed at an all-time high of 5,048.62; the decline from this peak signaled the beginning of the end of the dot-com bubble.[citation needed] The index declined to half its value within a year, and finally found a bear market bottom on October 10, 2002 with an intra-day low of 1,108.49 after a close of 1,114 the previous day. While the index gradually recovered since then, it did not trade for more than half of its peak value until May 2007.