Major stock exchanges, like the Nasdaq, are exclusive clubs - their reputations rest on the companies they trade. As such, the Nasdaq won't allow just any company to be traded on its exchange. Only companies with a solid history and top-notch management behind them are considered.

The Nasdaq has three sets of listing requirements. Each company must meet at least one of the three requirement sets, as well as the main rules for all companies.

Listing Requirements for All Companies
Each company must have a minimum of 1,250,000 publicly-traded shares upon listing, excluding those held by officers, directors or any beneficial owners of more then 10% of the company. In addition, the regular bid price at time of listing must be $4, and there must be at least three market makers for the stock. However, a company may qualify under a closing price alternative of $3 or $2 if the company meets varying reequirements. Each listing firm is also required to follow Nasdaq corporate governance rules 4350, 4351 and 4360. Companies must also have at least 450 round lot (100 shares) shareholders, 2,200 total shareholders, or 550 total shareholders with 1.1 million average trading volume over the past 12 months.

In addition to these requirements, companies must meet all of the criteria under at least one of the following standards.

Listing Standard No. 1
The company must have aggregate pre-tax earnings in the prior three years of at least $11 million, in the prior two years at least $2.2 million, and no one year in the prior three years can have a net loss.

Listing Standard No. 2
The company must have a minimum aggregate cash flow of at least $27.5 million for the past three fiscal years, with no negative cash flow in any of those three years. In addition, its average market capitalization over the prior 12 months must be at least $550 million, and revenues in the previous fiscal year must be $110 million, minimum.

Listing Standard No. 3
Companies can be removed from the cash flow requirement of Standard No. 2 if the average market capitalization over the past 12 months is at least $850 million, and revenues over the prior fiscal year are at least $90 million.

A company has three ways to get listed on the Nasdaq, depending on the underlying fundamentals of the company. If a company does not meet certain criteria, such as the operating income minimum, it has to make it up with larger minimum amounts in another area like revenue. This helps to improve the quality of companies listed on the exchange.

It doesn't end there. After a company gets listed on the market, it must maintain certain standards to continue trading. Failure to meet the specifications set out by the stock exchange will result in its delisting. Falling below the minimum required share price, or market capitalization, is one of the major factors triggering a delisting. Again, the exact details of delisting depend on the exchange.

(For further reading on the Nasdaq and other U.S. exchanges, see Getting to Know Stock Exchanges and The Tale Of Two Exchanges.)

  1. What were the primary financial crimes involved in the ZZZZ Best case?

    ZZZZ Best was a company started by Barry Jay Minkow that claimed to be a carpet cleaning business. In fact, it was a Ponzi ... Read Full Answer >>
  2. Why was the accountant responsible for auditing ZZZZ Best unable to determine that ...

    ZZZZ Best was a company which was started by Barry Jay Minkow as a front for a Ponzi scheme that went undetected for several ... Read Full Answer >>
  3. How is a penny stock created?

    A penny stock, like any other publicly traded stock, is created through a process called an initial public offering, or IPO. ... Read Full Answer >>
  4. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  5. What is the difference between shares outstanding and floating stock?

    Shares outstanding and floating stock are different measures of the shares of a particular stock. Shares outstanding is the ... Read Full Answer >>
  6. What is the difference between market risk premium and equity risk premium?

    The only meaningful difference between market-risk premium and equity-risk premium is scope. Both terms refer to the same ... Read Full Answer >>
Related Articles
  1. Investing Basics

    3 Key Signs Of A Market Top

    When stocks rise or fall, the financial fate of investors change, as well. There are certain signs that can reveal a stock’s course, and investors don’t need to be experts to spot them.
  2. Investing

    Asset Manager Ethics: Rules Governing Capital Markets

    The integrity of the capital markets needs to be kept at utmost importance for all investors. This article shows how to maintain the integrity while investing.
  3. Investing News

    Understand the SEC Rules on Equity Crowdfunding

    The SEC's adoption of equity crowdfunding rules, initiated under the JOBS Act, enables small investors to invest in companies that show early potential.
  4. Investing Basics

    Tax-Efficient Strategies For International Clients

    In a globalized world, international clients seek to diversify holdings by accessing U.S. markets. Creative strategies will help optimize tax positioning.
  5. Investing Basics

    What Happens in a Haircut?

    One meaning of haircut is the difference between prices at which a market maker can buy and sell a security.
  6. Investing Basics

    Understanding the Spot Market

    A spot market is a market where a commodity or security is bought or sold and then delivered immediately.
  7. Investing Basics

    Learn About the New York Stock Exchange

    The New York Stock Exchange (NYSE) is nicknamed the “Big Board,” and for good reason. It’s the largest, oldest and best-known stock exchange in the world.
  8. Investing

    What Rising Volatility Means for Momentum

    After remaining torpid for most of the year, equity market volatility is once again rising.
  9. Term

    Risk and Reward In Emerging Market Economies

    An emerging market economy is one that’s progressing into an advanced economy.
  10. Investing

    What Are The Three Key Elements of a Bond ETF?

    We explore the bond ETFs basics, because the only way to appreciate the benefits that this type of investment offers is to first understand how they work.
  1. Capital Markets

    Capital markets are markets for buying and selling equity and ...
  2. Equity Market

    The market in which shares are issued and traded, either through ...
  3. Market Value

    The price an asset would fetch in the marketplace. Market value ...
  4. Bulldog Market

    A nickname for the foreign bond market of the United Kingdom. ...
  5. Float Shrink

    A reduction in the number of a publicly traded company’s shares ...
  6. Capital Strike

    A refusal of businesses to invest in a particular sector of the ...

You May Also Like

Hot Definitions
  1. Ex Works (EXW)

    An international trade term requiring the seller to make goods ready for pickup at his or her own place of business. All ...
  2. Letter of Intent - LOI

    A document outlining the terms of an agreement before it is finalized. LOIs are usually not legally binding in their entirety. ...
  3. Purchasing Power

    The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing ...
  4. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  5. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  6. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!