The NASDAQ
Trading on Nasdaq
As a principal, you should know a few baseline facts about how Nasdaq trading is monitored and reported: all Nasdaq securities are eligible to be traded on margin, both the SEC and Nasdaq itself can halt trading in a Nasdaq-listed security, and trades must be reported within the Nasdaq system within 10 seconds of execution. Firms are also required to file reports on their short positions (the gross short position in each firm and customer account) at least twice a month to FINRA under FINRA Rule 4560 - a reporting requirement that’s separate from the short-sale trading restrictions found in Regulation SHO.
For securities to be listed on the National Association of Securities Dealers Automated Quotation (NASDAQ) System, they must meet certain minimum requirements for initial listing
- Minimum bid price of $4, or $3 provided they meet exceptions.
- At least 1,000,000 unrestricted publicly held and traded shares.
- At least 300 round lot holders (persons holding at least 100 shares), with at least 50% of such round lot holders holding unrestricted securities with a market value of at least $2,500.
- At least 3 registered and active market makers. After listing, only 2 are required to maintain.
- If the stock already trades over the counter, a minimum average daily trading volume of 2,000 shares over the prior 30 trading day period, with trades on more than half of those days.
There is also a list of standards for initial listing;
- Equity standard: Stockholder equity of at least $5million, market value of unrestricted publicly held shares of at least $15million, and 2-year operating history.
- Market value of listed securities standard: Market value of listed securities of at least $50million, stockholders’ equity of at least $4million, and market value of unrestricted publicly held shares of at least $15million.
- Net income standard: Net income from continuing operations of at least $750k in the most recent fiscal year, or 2 of the last 3 most recent, stockholders’ equity of at least $4million, and market value of unrestricted publicly held shares of at least $15million (raised from $5million by a rule change the SEC approved on December 18, 2025). A company listing with its IPO must meet the market value of unrestricted publicly held shares from the offering proceeds alone.
These are the current initial listing standards for the Nasdaq Capital Market, the entry-level tier described below; Nasdaq revises the thresholds from time to time.
Nasdaq characterizes companies into 3 different market tiers;
- Nasdaq global select market (GS or Nasdaq-GS) - Most exclusive, highest level tier. Roughly 1,200 large-cap companies, with the highest initial listing standards.
- Nasdaq global market (GM or Nasdaq-GM) - Roughly 1,450 mid-cap stocks with strict financial and liquidity requirements. Geared towards companies with international reach.
- Nasdaq capital market (CM or Nasdaq-CM) - Entry-level tier designed for small-cap companies. This tier has lower and less strict requirements.
Access levels
The Nasdaq System actually provides member firms that subscribe with systems that show the subscribers’ information, based on the level of subscription.
- Level 1: Shows the highest bid and the lowest ask, which makes up the inside quote. It will also include the size of each of them.
- Level 2: Shows all public quotes of market makers together with information of market dealers wishing to buy or sell stocks and the recently executed orders.
- Level 3: For market makers only. It includes everything in level 2, but allows the subscribers, in this case market makers, to enter and modify their quotes. Market makers, to maintain their status, are required to maintain continuous 2-sided quotes, bid-ask, with a minimum of 1 lot at each price.
Nasdaq has no trading floor, and instead operates with the Nasdaq Market Center Execution System, as a fully integrated, electronic, open-access, and transparent platform to automate trading for Nasdaq-listed and other national market securities. The maximum size is less than 1,000,000 shares. Orders may be entered before the market opens, up to 9:28am on the day (limit-on-open orders are accepted until 9:29:30am), if the participant wishes to participate in an opening cross, and prior to 3:55pm on the day to participate in closing cross (limit-on-close orders are accepted until 3:58pm).