Nasdaq Tightens Rules for Chinese Listings on U.S. Markets

Nasdaq rolled out changes to its listing rules Thursday. The exchange says it's doubling down on capital investment while protecting investors and keeping markets clean.

They're bumping up minimum free float requirements and IPO capital thresholds. Nasdaq's also getting tougher on suspensions and delistings when companies fall short. Quick action.

China-Focused Crackdown

The revised standards demand at least $15 million public float for listings. Pretty significant. Companies with market value below $5 million facing deficiencies? They'll get fast-tracked right off the exchange.

Chinese operators face special scrutiny with a $25 million threshold for public offerings in new listings. This matches what Nasdaq set back in 2020. Not a coincidence. John Zecca from the exchange stressed these changes are about protecting investors. Market integrity matters.

"Current market realities," Zecca called it. Seems like Nasdaq wants to look tough on standards while still making money from listings. They claim this helps investors access emerging companies. We'll see.

"These new listing standards represent one step in a necessary, industry-wide effort – alongside regulators, U.S. exchanges, and market participants – to closely examine trading behaviors in small company securities, with the goal of safeguarding market integrity and enhancing protection for investors."

–John Zecca, Executive Vice President and Global Chief Legal, Risk & Regulatory Officer at Nasdaq.

Pump-and-Dump Worries

Nasdaq's worried about pump-and-dumps. The exchange felt its minimum liquidity rules needed an update for today's trading environment. Kind of surprising it took this long.

They're bringing back that minimum threshold specifically for China-based companies. This builds on previous rules for markets where the PCAOB couldn't inspect auditors. Red flags everywhere.

Playing Nice with Regulators

The exchange wants closer ties with the SEC and FINRA. They'll report suspicious trading patterns. Smart move. This teamwork extends to international regulators too.

These rules still need SEC approval. After that, implementation happens fast. Companies currently trying to list get a 30-day grace period. That's it.

Non-compliant companies face suspension 60 days post-approval. Last month, Nasdaq suggested booting companies trading below $0.10 for ten straight days. Penny stocks on notice. Companies under $1 would have 360 days to fix things, unless they've already done a reverse split recently.

The SEC's asking Nasdaq about foreign companies getting lighter reporting requirements. It's not entirely clear how Nasdaq balances attracting foreign listings while protecting U.S. investors.

Meanwhile, BlackRock keeps pushing into Chinese markets. They've scored regulatory approvals for mutual funds there and built local partnerships. Money talks.