Nasdaq is seeking to become the exclusive trading venue for the small cap companies that are listed on the exchange.
Currently, small caps have “unlisted trading privileges” (UTP), which allow their shares to be traded on any of the 13 national securities exchanges even if they are not listed there.
But in a letter to the U.S. Securities and Exchange Commission, Nasdaq said companies that have an average daily trading volume of less than 100,000 shares in each of the prior six months should be allowed to opt out of UTP and trade exclusively on Nasdaq.
“Nasdaq proposes to establish a tier nestled within the U.S. public equity markets that is better tailored and far more hospitable to thinly-traded securities than is the all-purpose, undifferentiated market environment in which they suffer today,” it said.
The SEC had asked exchanges in October for suggestions on how to reduce market complexity, saying a suspension or elimination of UTP may be a worthwhile idea.
As S&P Global Market Intelligence reports, the eligible companies “are considerably smaller than the household names that represent the other 53% of Nasdaq’s listed securities,” accounting for 2.6% of the total market capitalization of all of its listings.
But Nasdaq believes its proposal would encourage more SMEs to tap the public equity markets, citing its First North Growth Market in the Nordic states as a model.
“We need to make progress on this,” Tal Cohen, who heads Nasdaq’s North American market services business, told S&P. “It’s time for the industry, the SEC and the exchanges to show issuers and investors that we’re serious about this.”
Rival exchanges, however, are concerned that listing exchanges would have outsized influence over the stocks exclusively available on their venues.
“[Nasdaq’s] proposed fix is to limit trading to a single national securities exchange, offering a single market structure,” Cboe Global Markets told the SEC in December. “The irony of this solution is not lost on Cboe.”
Nasdaq said it would not impose any specific fee on existing market data products for holding information about thinly-traded securities whose issuers terminated UTP.