The name of the New York Stock Exchange comes to your mind when you think of the most well-known stock exchange in the world. However, another name that has steadily risen to a major position in the last twenty-five years is NASDAQ.
The National Association of Securities Dealers Automated Quotations System, or NASDAQ as it’s commonly called, is an electronic stock exchange.
Stocks are not traded through a trading floor here, but rather through the automated network of computers. Based on market capitalization, NASDAQ is the second-largest stock exchange in the world.
Technology stocks are most commonly traded in NASDAQ. You would know whether a company is on NASDAQ or not based on the ticker symbol (like CSCO for Cisco, MSFT for Microsoft, and so on).
Oracle, Facebook, Apple, Microsoft, and Starbucks are some of the names you will find here.
With that being said, let’s take a closer look at the timetable and the significant regulations of NASDAQ.
Details of the Trading Schedule At NASDAQ
Like all other stock exchanges in Asia, Europe, and America, NASDAQ follows the usual Monday to Friday routine. During the weekends, it stays closed.
Here is the trading schedule of NASDAQ from Monday to Friday:
- 3:30 a.m. – 4:00 a.m.: Pre-opening session
- 4:00 a.m. – 9:30 a.m.: Opening session
- 9:30 a.m. – 4:00 p.m.: Core trading session
- 3:59 p.m. – 4:00 p.m.: Closing auction freeze period
- 4:00 p.m. – 8:00 p.m.: Extended hours
All the times mentioned here are in GMT. NASDAQ doesn’t close for lunch. From the opening to the closing bell, it works continuously.
Trades can also be made during the extended hours, though the trading volume is lesser. Lower volume leads to a greater spread, more price jumps, higher volatility, and increased risk. Investors have to act on the information released after the closing time of the market quickly.
When you are buying and selling stocks at NASDAQ, and more so during the extended hours, it helps to use tools like Alpaca. It will give you proper guidance into this financial market, regardless of whether you are a new investor looking for a free brokerage account or a seasoned pro.
Listing Regulations for the Companies
Being one of the biggest stock exchanges in the world, NASDAQ is like an exclusive club. Just about any company can’t do business on its exchange. It only considers companies with top-notch reputation and a solid history.
The listing regulations of NASDAQ are pretty complex that way, and an entry into it is only possible by following these guidelines.
- A company needs to have at least 1,250,000 publicly traded shares at the time of listing, except those held by the directors, officers, or other owners of over ten percent of the company.
- While listing, the regular bidding price has to be $4.00, with a minimum of 3 market makers for stocks.
- But, if a company fulfills all the requirements, it might be eligible for the closing price alternatives of $2.00 or $3.00.
- A listing firm also needs to obey all the rules of NASDAQ’s corporate governance under 4351, 4350, as well as 4360.
- Companies need to have a minimum of 450 round lot shareholders, 550 total shareholders, or 2,200 total shareholders. Along with that, they should have average trading volumes of about 1.1 million in the last year.
Besides all these requirements, a company also needs to fulfill all the criteria under any one of the standards given below:
Standard 1: Earnings
A company needs to have collective pre-tax earnings in the previous three years of a minimum of 11 million USD, in the last two years a minimum of 2.2 million USD, and zero net loss in any of the years before that.
Standard 2: Capitalization and Cash Flow
A company needs to have a collective cash flow of a minimum of 27.5 million USD for the last three fiscal years, with zero negative cash flow. The average market capitalization during the last twelve months should not be less than 550 million USD, and minimum revenues in the last fiscal year should be 110 million USD.
Standard 3: Capitalization and Revenue
A company can get removed from the cash flow needs of the second standard when the average market capitalization for the last twelve months stands at least at 850 million USD, and the revenues in the last fiscal year are a minimum of 90 million USD
Standard 4: Assets and Equity
A company can eliminate the revenue and cash flow requirement, along with decreasing its marketing capitalization needs to 160 million USD when the total assets stand at 80 million USD, and the equity of stockholders stands at 55 million USD, at least.
Keep this factor in mind when you are planning to go for a paper trading account.
Delisting Regulations for Investors in NASDAQ
A company has to maintain a couple of standards imposed by NASDAQ to stay listed. These regulations have been implemented so that the investors can be certain that the enlisted company is completely reliable, regardless of the amount of time that has passed after the initial offering of the firm.
The exchange should ask for periodic maintenance fees from the listed companies for funding their ongoing scrutiny. The annual listing fees on the NASDAQ Global Market are capped at $155,000. This annual fee is a lot like the tuition fee one has to pay in college after admission.
If you consider the NASDAQ Global Market, the ongoing regulation is that a listed company should sustain at least 750,000 public shares. These shares should be worth a minimum of 1.1 million USD. The company will be delisted from NASDAQ if the amount is less.
The stringent regulations of NASDAQ come with a singular purpose of safeguarding the interests of its investors. Its continued excellent performance has been the result of these strict actions and ground rules that it has set.
And, going by the current rate of progress, NASDAQ will continue to be profitable to the investors. So, keeping the time table along with all the rules and regulations of NASDAQ in mind is wise.