tl;dr
Nasdaq is tightening its listing rules to enhance investor protection and market integrity by introducing stricter public float requirements, faster delisting of underperforming firms, and higher capital thresholds, especially for Chinese-based companies. The changes include a $15 million minimum ...
**Nasdaq Tightens Listing Rules to Boost Investor Protection and Market Integrity**
Nasdaq is shaking up its listing rules, aiming to fortify investor safeguards, enhance market integrity, and keep pace with evolving trading dynamics. The stock exchange’s latest proposal includes stricter requirements for public float, capital raised during IPOs, and faster delisting of underperforming firms—particularly targeting companies based in China.
At the heart of the changes is a $15 million minimum public float requirement for all listed companies, a move designed to ensure liquidity and reduce the risk of volatile, thinly traded stocks. Firms with a market value of listed securities below $5 million will face expedited suspension and delisting, a measure intended to weed out companies that fail to meet basic standards. For Chinese-based firms, the stakes are higher: a new $25 million threshold for public offering proceeds matches Nasdaq’s 2020 rule, reflecting a continued focus on accountability in markets where regulatory scrutiny is limited.
John Zecca, Nasdaq’s executive vice president, emphasized that the revisions align with “market realities” and aim to protect investors from manipulative practices like pump-and-dump schemes. “These standards are part of a broader industry effort to safeguard market integrity,” he said, noting that the changes also make it easier for emerging companies to access capital while ensuring fair trading practices.
The revisions come as Nasdaq confronts rising concerns about liquidity in small-cap stocks and the challenges posed by China’s opaque regulatory environment. The exchange is reintroducing the $25 million public offering threshold for Chinese firms, a nod to past struggles with the Public Company Accounting Oversight Board (PCAOB)’s inability to inspect auditors in restrictive markets.
Collaboration with regulators will be key. Nasdaq plans to work closely with the SEC and FINRA to report manipulative trading activities and maintain high standards in U.S. markets. The proposed rules, however, still need SEC approval, with a 30-day window for companies in the initial listing process to comply under the prior standards. Once approved, delisting could begin 60 days later.
The timeline for enforcement is strict: companies trading below $0.10 for ten consecutive days face suspension, while those below $1 will be delisted after 360 days—though firms that completed a reverse stock split in the prior year may avoid additional compliance periods.
Meanwhile, the SEC is seeking input on whether foreign firms trading in the U.S. should qualify for lighter reporting requirements, a balancing act between attracting international companies and protecting U.S. investors.
As Nasdaq’s proposals take shape, the question remains: Will these stricter rules foster a more resilient market, or could they inadvertently push some companies to less-regulated exchanges? For now, the message is clear—Nasdaq is doubling down on its mission to protect investors and ensure transparency, even as it navigates the complexities of a globalized financial landscape.