Nasdaq raises listing standards for Chinese companies entering U.S. markets

Nasdaq announced plans on Thursday to revise its listing rules in a bid to solidify its commitment to capital investment. The initiative also aims at ensuring investor protection while maintaining market integrity. 

The stock exchange suggested plans to introduce enhanced minimum free float requirements and capital raised during initial public offerings. Nasdaq also proposed stricter rules on suspension and delisting of firms that fail to meet its revised listing standards.

Nasdaq targets companies operating in China

Under the stock exchange’s net income standard, companies will require a minimum of $15 million of public float to be listed. Firms with a market value of listed securities under $5 million and a listing deficiency will also be suspended and delisted from the exchange at a faster rate.

Nasdaq’s new requirements are also targeting companies operating in China, establishing a $25 million threshold for public offering procedures in new listings. The $25 million threshold for public offering proceeds matches the exchange’s previous $25 million standard established in its 2020 rule change. John Zecca, executive vice president of the stock exchange, highlighted that the aim is to focus on investor protection and market integrity.

Zecca also said the revised standards are in line with market realities and show the company’s commitment to promoting fair and orderly markets. According to him, the initiative also makes emerging companies easily available to investors through the stock exchange platform.

Nasdaq said that its revised standards come as it seeks to address emerging patterns linked to pump-and-dump schemes in the U.S. trading environment. The firm stated that it had to revise its minimum liquidity standard rules to fit the current trading environment. According to the exchange, the new public listing requirements are meant to remain relevant and effective.

The stock exchange added that it reintroduced the minimum public offering threshold for China-based companies. The initiative also builds on the firm’s previous standards set for restrictive markets, where the Public Company Accounting Oversight Board (PCAOB) could not inspect auditors. 

Nasdaq plans to collaborate with SEC and FINRA 

Nasdaq also plans to strengthen its relationship with the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) by reporting potential manipulative trading activities. The initiative is also meant to strengthen the exchange’s cooperation with both domestic and international regulators to maintain high standards in the U.S. trading market environment.

The proposed rules are still pending approval from the SEC, where the exchange wants to implement the changes promptly. Companies in the initial listing process will get 30 days to complete the process under the prior standards, after which the new listing requirements will begin. 

Nasdaq is also planning to begin suspending and delisting companies 60 days after SEC approval. Last month, the U.S. stock exchange proposed to suspend and delist companies trading below $0.10 for ten consecutive trading days. Nasdaq also issued a 360 days for companies trading on the exchange below $1, with no added compliance periods for firms that effected a reverse stock split within the prior year.

The SEC also requested comments from Nasdaq regarding the eligibility of foreign firms trading in the U.S. to benefit from lighter U.S. reporting requirements. The stock exchange stated the need to balance the interest in attracting foreign companies to the U.S., while still protecting all investors in the U.S. public markets.

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