NEW YORK ( Reuters Blogs) -- When you look up the price of a stock on the Nasdaq stock exchange, you're not really looking up the price at which it's trading on that exchange. All of the Nasdaq stocks trade on dozens of exchanges, all of which have the right to trade in those stocks. That right is known in the market as unlisted trading privileges, or UTP. The job of the Nasdaq is to serve as the securities information processor, or SIP, for all those different exchanges: the exchanges report to the Nasdaq all of the information they have on bids and offers and trades, and then the Nasdaq aggregates all that information and presents it in one place. Most importantly, it shows the most recent price at which any given stock traded, on any exchange. That's the price you're looking at.Now the Nasdaq is an exchange itself, but it doesn't really have to be: It could halt all trading on its own exchange tomorrow, and no real harm would be done. So long as Nasdaq stocks could trade on all the other exchanges, and the Nasdaq could continue to keep tabs on all the trading going on across the different exchanges, no one would really notice. The real importance of the Nasdaq, then, is not its status as an exchange, but rather its status as a SIP.
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