Nasdaq's Enhanced Listing Standards: A Focus on Investor Protection and Market Integrity

Nasdaq (Nasdaq: NDAQ) is enhancing its initial and continued listing standards to strengthen its commitment to capital formation, investor protection, and market integrity. These proposed enhancements, submitted to the U.S. Securities and Exchange Commission (SEC), aim to introduce stricter requirements for minimum public float and capital raised during initial public offerings (IPOs), particularly for China-based companies. The updates also include more stringent suspension and delisting procedures for issuers failing to meet Nasdaq’s continued listing criteria.

Current Nasdaq Listing Rules

The current Nasdaq Listing Rules require a company to have a minimum Market Value of Unrestricted Publicly Held Shares (MVUPHS). This refers to the market value of shares not held directly or indirectly by an officer, director, or 10% shareholder and not subject to resale restrictions. For initial listing on the Nasdaq Global Market, a company must have a minimum MVUPHS of $8 million under the income standard. For initial listing on the Nasdaq Capital Market, a company must have a minimum MVUPHS of $5 million under the net income standard.

Recently, Nasdaq amended the liquidity requirements for initial listing so that shares registered for resale are no longer counted as Unrestricted Publicly Held Shares. As a result, a newly listing company in connection with an IPO must meet the MVUPHS based on shares being sold in the offering.

Proposed Enhancements to Listing Standards

Several key changes are being proposed to enhance the listing standards:* Increased Minimum MVUPHS: Nasdaq is proposing to increase the minimum MVUPHS for companies listing under the net income standard on the Nasdaq Capital Market from $5 million to $15 million.* Accelerated Suspension and Delisting: Nasdaq proposes suspension from trading and immediate delisting (rather than providing a compliance period) for any company that becomes noncompliant with a numeric listing requirement and that has a market value of listed securities of less than $5 million for a period of 10 consecutive business days.* New Listing Requirement for China-Based Companies: Nasdaq is also proposing a new listing requirement specifically for companies based in China.

Quantitative Standards and Compliance Periods

Nasdaq Listing Rules establish minimum quantitative standards that companies must meet to remain listed. If a company fails to maintain compliance with these standards, it may be granted a period to regain compliance.* 180-Calendar-Day Compliance Period: Generally, a Nasdaq-listed company is provided a 180-calendar-day compliance period if it fails to meet continued listing requirements related to minimum bid price, market value of listed securities, or market value of publicly held shares.* 30-Calendar-Day Compliance Period: A 30-calendar-day compliance period may apply if the company fails to meet the requirement for the minimum number of market makers.* Discretionary Compliance Period: For other quantitative deficiencies-such as stockholders’ equity, net income, number of public holders, number of publicly held shares, total assets, or total revenue-Nasdaq does not automatically grant a compliance period. Instead, the company may submit a plan of compliance for Nasdaq’s review. Upon review, Nasdaq may grant an extension of up to 180 calendar days to regain compliance.

If the company fails to regain compliance within the applicable period, or if Nasdaq rejects the compliance plan, Nasdaq will issue a delisting determination letter. Upon receiving this letter, the company may request a hearing in a timely manner.

Recent Actions and Proposed Rules

In recent years, Nasdaq has already taken actions to enhance its listing standards and more quickly delist certain companies that have repeated failures to maintain compliance with those standards.

In May 2020, Nasdaq proposed, and the SEC approved in October 2021, new rules for IPOs from “restrictive markets” that imposed higher requirements for companies, mainly from China, to list on its markets. The rules required that companies from restrictive markets have a minimum public offering size of $25 million, or 25% of the value of their securities.

In July 2019, Nasdaq changed its liquidity requirements to exclude restricted holdings from the shareholder count and public float calculation, and to require at least half of the minimum number of round lot holders to own unrestricted securities with a minimum value of $2,500.

In April 2025, Nasdaq required newly listed companies to satisfy adjusted rules related to meeting market value thresholds solely from shares sold in the IPO, thereby excluding shares held by selling shareholders.

In September 2021, Nasdaq implemented a new rule that limited companies’ ability to effect excessive reverse stock splits.

On December 12, 2025, The Nasdaq Stock Market LLC ("Nasdaq") filed a proposed rule change with the SEC requesting authorization to deny initial listing to companies, even where the applicant meets all stated listing requirements.

Nasdaq determined that additional rules beyond the September proposals were necessary to address the concerns of pump-and-dump schemes affecting newly listed companies.

Nasdaq’s existing listing requirements are based on the characteristics of the company itself and the securities it seeks to list.

New Listing Rule IM-5101-3 provides Nasdaq with authority under Rule 5101 to deny initial listing based on factors that could make the security in question susceptible to manipulation based on the concerns that Nasdaq and other regulators have identified with similarly situated companies.

Under the new rule, if Nasdaq denies an initial listing, Nasdaq Staff will issue a written determination describing the basis for its decision.

By receiving the authority to exercise discretion to deny initial listings in this manner, Nasdaq believes it can better address situations in which a company satisfies Nasdaq's listing requirements, but has characteristics similar to other companies' securities where trading problems were observed and could make the company susceptible to manipulation.

These changes build upon Nasdaq’s history of regulatory leadership that have been followed by others, including prior changes aimed at improving liquidity, tightening compliance timelines, and curbing abusive practices such as excessive reverse stock splits.

Together, these efforts underscore Nasdaq’s leadership in fostering a resilient and transparent marketplace that supports appropriate listing standards for issuers and safeguards investor interests.

Implementation Timeline

Nasdaq is proposing a delay of 30 days after approval before the changes become effective. Nasdaq’s proposed amendments (SR-NASDAQ-2025-068 and SR-NASDAQ-2025-069) remain subject to the SEC review and approval. The SEC will make its decision within 45 days of the date of publication of the proposals in the Federal Register or within such longer period (1) as the SEC may designate up to 90 days of such date or (2) as to which Nasdaq consents.

If the proposed rule is approved by the SEC, Nasdaq is proposing to implement the changes to the initial listing requirements promptly but will give companies that have already taken steps to commence an initial listing 30 days to complete the process under the prior standards, and thereafter all new listings will have to meet the new requirements.

For the accelerated suspension and delisting procedures, Nasdaq has proposed a 60-day transition period following Commission approval.

For the initial listing requirement rule changes, Nasdaq will give companies already in the initial listing process a 30-day grace period before the rule comes into effect. All initial listings thereafter will be expected to adhere to the new rules.

Potential Impact

Once adopted, smaller issuers may face higher thresholds when seeking to list on Nasdaq or maintain their listing status. Companies considering a US listing-particularly those with China-based operations-should closely monitor developments. According to data published by the US-China Economic and Security Review Commission, as of March 2025, there were approximately 20 Chinese companies with market capitalizations below US$5 million.

Accordingly, we expect that the small IPO market will be significantly impacted, especially if companies are trying to list on the Nasdaq using the equity standard or market value of listed securities standard, as such companies will need to have an initial public offering of at least $15 million.

These new rules demand more careful planning and capital-raising strategies for companies considering a Nasdaq listing.

Table: Summary of Proposed Changes

| Rule Change | Existing Rule | Proposed Rule || ---------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- || Minimum Market Value of Publicly Held Shares | New listings under the net income standard must have $5 million in market value of unrestricted publicly held shares. | Increase the minimum market value of publicly held shares (“public float”) to $15 million for initial listings under the net income standard. || Accelerated Suspension and Delisting | Issuers are typically sent a deficiency notice and given 180 calendar days to cure the deficiency for Minimum Bid Price, Market Value of Listed Securities (MVLS), and Market Value of Publicly Held Shares (MVPHS). | Nasdaq would “accelerate” suspension and delisting for companies that have listing deficiencies and a market capitalization of less than $5 million. || Minimum Public Offering Size for Restrictive Markets | Requires a minimum public offering size of $25 million, or 25% of the value of their securities for companies from “restrictive markets”. A company is considered to be principally administered in a Restrictive Market if (i) the books and records are located in that jurisdiction; (ii) at least 50% of the its assets are located in such jurisdiction; or (iii) at least 50% of its revenues are from such jurisdiction. | To combat similar concerns regarding the US$25 million minimum raise for China-based companies, Nasdaq has proposed parallel requirements for companies listing through de-SPAC transactions. China is currently not considered a “Restrictive Market” as it granted the PCAOB inspection access in December 2022. |

These enhancements reflect Nasdaq’s ongoing commitment to evolve its standards in step with market realities and to lead by example in promoting fair and orderly markets.