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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.
In NASDAQ much like in the real world each broker or the dealer as you may want to call it has an inventory of shares which they are willing to sell and that means that they can easily assume that their inventory along with other broker’s inventory will be taken care of. In effect each order if fulfilled based on how much inventory or shares you are holding.
Now there are two types of orders market order and limit order. Let us say that you have a limit order which means that you are neither willing to buy above that set limit nor willing to sell below that price. Market order means that you are saying that at whatever price the dealer is holding the inventory the system should go ahead an buy that. So what happens when the dealer only has 500 shares and you place an order for buying 1000 shares at market price? For the fulfillment of this order you will get 500 shares of the order at the stated price and another 500 shares at the price the dealer says it got somebody to sell the shares to you. Now this price may be higher or below the price at which you got the initial 500 shares.
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
As small investors NASDAQ is the one which provides a very option for trading apart from American Stock Exchange.
The stock exchange which provides capability for trading in penny stocks is teh OTCBB. Penny stock trading is very risk and volatile.
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