NASDAQ proposes to eliminate automatic upgrade to Global Select Market

by Cydney Posner

NASDAQ has proposed to modify its rules to eliminate the automatic transfer of companies from the NASDAQ Global Market to the NASDAQ Global Select Market.

You may recall that NASDAQ has three listing tiers: the NASDAQ Global Select Market, the NASDAQ Global Market, and the NASDAQ Capital Market. Companies may apply for listing on the Global Select tier (the most prestigious of the three tiers) or transfer to that tier if they qualify. In addition, however, when the Global Select was created in 2006, NASDAQ also employed an annual review process under which it assessed whether companies listed on the Global Market qualified for the Global Select and, if so, automatically transferred the listing.

NASDAQ now proposes to amend Rule 5305 to eliminate the annual review and automatic transfer process. NASDAQ contends that companies are now sufficiently familiar with the three tiers so that automatic review and transfer is no longer necessary. In addition, in light of the significant decline in the number of companies qualifying for automatic transfer, economies of scale associated with the annual review and automatic transfer have likewise declined.

If the proposal is adopted, companies will need to proactively monitor whether they qualify to transfer instead of relying on NASDAQ to inform them.  The change would be implemented on approval, and NASDAQ anticipates that the companies transferred in January 2014 would be the last group automatically transferred.  However, companies can still apply for the upgraded listing at any time, and the associated review will be conducted by NASDAQ without cost to the issuer.

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