Nasdaq Proposes Stricter Listing Rules to Boost Market Quality

On September 3, 2025, Eastern Time, Nasdaq announced a series of proposed changes to its initial listing standards. The revisions aim to strengthen regulatory requirements for certain international companies and small-capitalization companies, reinforcing Nasdaq's long-standing commitment to capital formation, investor protection, and market integrity. This move has quickly drawn significant market attention, particularly from companies seeking to list on the exchange.

I. According to Nasdaq's filing, the Revised Standards mainly Cover Three Areas

1. Higher MVUPHS Threshold for Net Income Standard

Nasdaq is proposing to significantly increase the Minimum Market Value of Unrestricted Publicly Held Shares (MVUPHS) requirement specifically for new listing companies choosing to list under the Net Income Standard.

If a company chooses to list on Nasdaq under the net income standard, the minimum market value of its unrestricted publicly held shares must reach $15 million.

It's important to note that the MVUPHS requirements for other listing standards remain unchanged. The current requirements for the Capital and Global Markets are as follows:

According to Nasdaq, this increase is designed to enhance market liquidity, mitigate the risks of market manipulation, and harmonize listing criteria, with the ultimate goal of safeguarding investors and promoting orderly market.

2. Accelerated Delisting Mechanism: Immediate Trading Halt for Companies with Market Cap Below $5 Million

If a company has listing deficiencies and its market value of listed securities (MVLS) remains below $5 million for 10 consecutive trading days, it will be immediately suspended and subject to delisting, with no compliance period.

This revision signals that Nasdaq will no longer tolerate long-term "shell companies" or "zombie firms", aiming to clean up the market and improve overall quality.

3. New Special Requirements for Chinese Concept Stocks: IPO Proceeds Must Be ≥ $25 Million

For companies primarily operating in China (including Hong Kong and Macau), Nasdaq proposes additional listing thresholds. These new rules are proposed to become effective 30 days after SEC approval.

a. Applicable Scope 

A company is deemed "primarily operating in China" if it meets any of the following:
(1) The company's books and records are located in China.
(2) At least 50% of the company's assets are located in China.
(3) At least 50% of the company's revenues are derived from China.
(4) At least 50% of the company's directors are citizens of, or reside in, China.
(5) At least 50% of the company's officers are citizens of, or reside in, China.
(6) At least 50% of the company's employees are based in China.
(7) The company is controlled by, or under common control with, one or more persons or entities that are citizens of, reside in, or whose business is headquartered, incorporated, or principally administered in China.

b. New Requirements

II. Policy Background and Regulatory Logic

This revision is not an isolated event, but part of a broader trend of tightening U.S. capital market regulation. It reflects Nasdaq's institutional response to pressures spanning investor protection, market quality improvement, and cross-border regulatory coordination.

· HFCAA (Holding Foreign Companies Accountable Act) Continues to Take Effect
The act mandates trading prohibitions for issuers from jurisdictions where the PCAOB cannot conduct audit inspections. Within this regulatory context, Nasdaq has proposed new listing criteria, aligning its rules with the heightened focus on investor protection and market integrity.

· SEC and PCAOB Have Repeatedly Warned About "low market capitalization and low liquidity" Risks
U.S. regulators have consistently highlighted risks from low-liquidity stocks. Nasdaq's new immediate delisting rule for companies with an MVLS <$5 million is a direct response to this regulatory guidance.

· Nasdaq Faces Internal Pressure Over Market Quality
According to Nasdaq's SEC filing, since August 2022, nearly 70% of trading matters referred to regulators involved Chinese companies, which account for less than 10% of all Nasdaq listings. Nasdaq stated these stocks are prone to low liquidity and are "more susceptible to manipulation," justifying its new rules as necessary to protect "fair and orderly trading."

Thus, this revision marks Nasdaq's strategic shift from an inclusive market to a quality-first market, proactively aligning with regulatory direction and pre-empting risk.

III. Reshaping the Listing Landscape

· Small-Cap Listings Become Impractical
Companies with IPO proceeds <$25 million or market cap <$5 million will be blocked from listing or rapidly delisted.

· Variable Interest Entity (VIE) Structures Cannot Circumvent Rules
Even if a firm uses a VIE structure, it will still be deemed primarily operating in Relevant Jurisdiction if its assets, revenues, personnel, or control relationships are predominantly located there, regardless of its place of incorporation.

· Shell Games and OTC Uplisting Routes Shut Down
Reverse mergers, OTC-to-Nasdaq uplisting, and other "backdoor listing" methods are no longer viable due to higher market cap and trading history requirements.
· Rising Liquidity Needs and Compliance Costs
The Higher liquidity requirements and the immediate delisting mechanism will compel companies to onboard more international investors and enlarge their underwriting syndicates well in advance, while simultaneously strengthening continuous information disclosure; failure to do so will sharply increase the risk of trading suspension.

IV. Conclusion

Nasdaq's proposed listing standard revisions represent a systematic upgrade in market quality and investor protection. These changes align with the HFCAA and SEC regulatory direction, and reflect the exchange's institutional response to cross-border audit issues and liquidity risks.

Once implemented, Nasdaq will raise the bar for issuer quality globally. Affected companies, particularly those from jurisdictions with heightened scrutiny, will face stricter requirements in terms of market cap, fundraising, and ongoing compliance.

References:

https://ir.nasdaq.com/news-releases/news-release-details/nasdaq-proposes-changes-its-listing-standards

https://listingcenter.nasdaq.com/assets/rulebook/nasdaq/filings/SR-NASDAQ-2025-068.pdf

https://listingcenter.nasdaq.com/assets/rulebook/nasdaq/filings/SR-NASDAQ-2025-069.pdf

Disclaimer：This document is based on publicly available information and is intended for informational and analytical purposes only. It does not constitute investment advice, legal opinion, or listing decision basis. The proposed rule changes described are in the proposal stage and are subject to final approval and announcement by Nasdaq and the U.S. Securities and Exchange Commission (SEC). Readers should not rely solely on this information for making any investment or business decisions. The author and publisher shall not be held liable for any direct or indirect losses arising from the use of this content. Consultation with professional financial, legal, or regulatory advisors is strongly recommended before taking any action. Should you require further clarification or wish to explore professional service engagement, please do not hesitate to contact us.