On December 12, 2025, The Nasdaq Stock Market LLC (“Nasdaq”) filed a proposed rule change with the Securities and Exchange Commission (“SEC”) that would expand Nasdaq’s authority to deny initial listing, even when an issuer satisfies all applicable quantitative and corporate governance listing requirements. Nasdaq states that the proposal is intended to support meaningful listing standards and protect investors and market integrity at the point of entry into the public markets.

Background

Nasdaq’s proposal follows a period in which the SEC has suspended trading in a number of newly public companies based on concerns relating to problematic or unusual trading and potential market manipulation, including trading driven by social media recommendations. Nasdaq notes that these cases have highlighted risks associated with thin public floats, concentrated ownership, and other structural features that may not be fully addressed by existing listing criteria.

Under the proposal, Nasdaq would adopt new interpretive material, IM‑5101‑3, under Nasdaq Rule 5101 that would permit it to deny an initial listing if it determines, based on a qualitative assessment, that the company’s securities are susceptible to manipulation or present comparable risks. This authority would apply even if the issuer otherwise meets Nasdaq’s existing listing requirements. Nasdaq explains that the change would allow consideration of broader risk indicators suggesting susceptibility to problematic or unusual trading. Under the proposed rule, if Nasdaq denies a listing pursuant to this authority, it must issue a written determination explaining the basis for its decision. The issuer would have the right to appeal the determination to a Nasdaq hearings panel and would be required to publicly disclose the denial and the concerns identified by Nasdaq.

Qualitative Factors Nasdaq May Consider

The proposed interpretive material identifies a non-exclusive set of factors Nasdaq may consider when evaluating an initial listing application, including:

  • Jurisdictional and legal considerations, such as whether U.S. investors and regulators have meaningful access to information and legal remedies;
  • Ownership and control structures, particularly where control is concentrated or held by persons outside U.S. regulatory reach;
  • Public float, liquidity, and share distribution, including whether limited float or concentrated ownership could contribute to volatility;
  • Management and board experience with U.S. public company reporting and compliance requirements;
  • Regulatory or audit-related concerns, including referrals or issues raised by regulators or auditors; and
  • The history of key advisors and service providers, including whether they have been associated with prior listings that experienced problematic trading patterns.

Nasdaq emphasizes that these factors are not exhaustive and that no single factor would be determinative.

Nasdaq notes in the proposal that other U.S. exchanges, including NYSE and NYSE American, already operate under listing frameworks that permit discretionary determinations at the initial listing stage, although those regimes are structured differently. This proposal, together with Nasdaq’s September 2025 proposals, reflects a broader effort to strengthen oversight at the initial listing stage. They signal increased focus on listing quality, structural risk factors, and the exchange’s role in screening issuers before they enter the U.S. public markets, including in jurisdictions where access to information or legal remedies may be constrained. The proposal also aligns with concerns previously raised for companies primarily operating in China.

Considerations for Issuers and Counsel

For issuers seeking an initial Nasdaq listing, the proposal underscores the importance of assessing qualitative risk factors alongside technical listing compliance. In-house counsel and management may wish to consider whether ownership structures, jurisdictional features, public float characteristics, management experience, or the regulatory history of advisors involved in the offering could raise concerns under the proposed framework.

Advisors should also be mindful that Nasdaq may consider broader market patterns and past outcomes associated with similar listings when reviewing applications, rather than focusing exclusively on issuer-specific facts. Issuers and their advisors should consider how this expanded authority, if approved, could affect listing readiness, timing, and engagement with the exchange during the application process. Link to the proposal.