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Notice2026-09966

Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Amendment No. 3 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 3, To Adopt Additional Initial Listing Criteria for Companies Primarily Operating in China

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Published

May 19, 2026

Issuing agencies

Securities and Exchange Commission

Full Text

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<title>Federal Register, Volume 91 Issue 96 (Tuesday, May 19, 2026)</title>
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[Federal Register Volume 91, Number 96 (Tuesday, May 19, 2026)]
[Notices]
[Pages 29183-29198]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-09966]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-105494; File No. SR-NASDAQ-2025-069]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing of Amendment No. 3 and Order Granting Accelerated
Approval of a Proposed Rule Change, as Modified by Amendment No. 3, To
Adopt Additional Initial Listing Criteria for Companies Primarily
Operating in China

May 14, 2026.

I. Introduction

On September 4, 2025, the Nasdaq Stock Market LLC (``Exchange'' or
``Nasdaq'') filed with the Securities and Exchange Commission
(``Commission'' or ``SEC''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to adopt heightened initial
listing standards for companies primarily operating in the People's
Republic of China (``China'' or ``PRC''), including the Hong Kong
Special Administrative Region (``Hong Kong'') and the Macau Special
Administrative Region (``Macau'') (collectively ``China-based
companies''). On September 12, 2025, the Exchange filed Amendment No. 1
to the proposed rule change, which replaced and superseded the original
filing in its entirety. The proposed rule change, as modified by
Amendment No. 1, was published for comment in the Federal Register on
September 19, 2025.\3\ On September 25, 2025, the Commission designated
a longer period within which to take action on the proposed rule
change, as modified by Amendment No. 1.\4\ On December 18, 2025, the
Commission instituted proceedings pursuant to Section 19(b)(2)(B) of
the Act \5\ to determine whether to approve or disapprove the proposed
rule change, as modified by Amendment No. 1.\6\ On March 11, 2026, the
Commission issued a notice of designation of a longer period of time
for Commission action on proceedings to determine whether to approve or
disapprove the proposed rule change, as modified by Amendment No. 1.\7\
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 103979 (Sept. 16,
2025), 90 FR 45298 (``Notice''). Comments received on the proposed
rule change are available at: <a href="https://www.sec.gov/comments/sr-nasdaq-2025-069/srnasdaq2025069.htm">https://www.sec.gov/comments/sr-nasdaq-2025-069/srnasdaq2025069.htm</a>.
\4\ See Securities Exchange Act Release No. 104058, 90 FR 46973
(Sept. 30, 2025). The Commission designated December 18, 2025, as
the date by which the Commission shall approve, disapprove, or
institute proceedings to determine whether to disapprove the
proposed rule change, as modified by Amendment No. 1. See id.
\5\ 15 U.S.C. 78s(b)(2)(B).
\6\ See Securities Exchange Act Release No. 104456, 90 FR 60214
(Dec. 23, 2025) (``OIP'').
\7\ See Securities Exchange Act Release No. 104969, 91 FR 12644
(Mar. 16, 2026). The Commission designated May 17, 2026, as the date
by which the Commission must issue an order approving or
disapproving the proposed rule change, as modified by Amendment No.
1. See id.
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On April 14, 2026, the Exchange filed Amendment No. 2 to the
proposed rule change, which superseded the original proposed rule
change, as modified by Amendment No. 1, in its entirety.\8\ On May 1,
2026, the Exchange filed Amendment No. 3 to the proposed rule change,
which superseded the original proposed rule change, as modified by
Amendment No. 2, in its entirety.\9\ The Commission is publishing this
notice and order to solicit comments on Amendment No. 3 in Items II and
III below, which Items have been prepared by the Exchange, and to
approve the proposed rule change, as modified by Amendment No. 3, on an
accelerated basis.
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\8\ In Amendment No. 2, the Exchange: (1) made certain
clarifications to proposed Nasdaq Rule 5210(l)(iii) in relation to a
company seeking to list by Direct Listing, and proposed Nasdaq Rule
5210(l)(iv) in relation to a company whose security is trading on
the over-the-counter market or that is transferring its listing from
another national securities exchange; (2) provided additional
explanation of certain aspects of the proposal; (3) provided
responses to comment letters; and (4) made other technical and non-
substantive changes. The full text of Amendment No. 2 can be found
on the Commission's website at <a href="https://www.sec.gov/comments/SR-NASDAQ-2025-069/srnasdaq2025069-751908-2319014.pdf">https://www.sec.gov/comments/SR-NASDAQ-2025-069/srnasdaq2025069-751908-2319014.pdf</a> (``Amendment No.
2'').
\9\ In Amendment No. 3, the Exchange: (1) amended proposed
Nasdaq Rule 5210(1)(iii) such that a China-based company seeking to
list in connection with a Direct Listing will not be permitted to
list on the Nasdaq Global Market (``NGM''), (2) provided additional
explanation of certain aspects of the proposal; and (3) made other
technical and non-substantive changes. The full text of Amendment
No. 3 can be found on the Commission's website at <a href="https://www.sec.gov/comments/SR-NASDAQ-2025-069/srnasdaq2025069-765987-2350834.pdf">https://www.sec.gov/comments/SR-NASDAQ-2025-069/srnasdaq2025069-765987-2350834.pdf</a> (``Amendment No. 3'').
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II. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

The Exchange proposes to adopt additional initial listing criteria
for companies primarily operating in China, including the Hong Kong
Special Administrative Region and the Macau Special Administrative
Region. This Amendment No. 3 supersedes the original filing in its
entirety.\10\
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\10\ This Amendment No. 3 is being filed in order to add
additional details to the proposal, and revise the requirements
applicable to Direct Listings in the discussion and proposed rule
text.
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The text of the proposed rule change is available on the Exchange's
website at

[[Page 29184]]

<a href="https://listingcenter.nasdaq.com/rulebook/nasdaq/rulefilings">https://listingcenter.nasdaq.com/rulebook/nasdaq/rulefilings</a>, and at
the principal office of the Exchange.

III. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item [V] below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
Since 2020, there has been a sharp increase in the number of
companies from the People's Republic of China (``China'' or the
``PRC'') seeking to list in the United States. A record number of
Chinese companies sought a U.S. listing in 2024 and that pace continued
in 2025.\11\ U.S. investors have increasingly sought exposure to
emerging market companies as part of a diversified portfolio, and China
has the most emerging market companies globally, both in terms of
number and their collective market value.\12\ Chinese companies have
been drawn to the higher valuations, diverse investor base, greater
liquidity, and overall size of the U.S. capital markets, which allow
Chinese companies to raise significantly more capital than they could
in their domestic markets.\13\ As a result of these dynamics, emerging
market companies have sought to raise funds in the U.S. and list on
Nasdaq.
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\11\ See ``Deloitte China Releases 2025 Review and 2026 Outlook
for Chinese Mainland & HK IPO Markets'' dated Dec. 18, 2025,
available at <a href="https://www.deloitte.com/cn/en/about/press-room/mainland-and-hk-ipo-markets-2025-review-2026-outlook.html">https://www.deloitte.com/cn/en/about/press-room/mainland-and-hk-ipo-markets-2025-review-2026-outlook.html</a>.
\12\ China represents the largest single-country weight in major
emerging market indices. For example, it accounts for approximately
25% of the total MSCI Emerging Markets Index as of March 31, 2026.
The MSCI Emerging Markets Index captures large and mid-cap
representation across 24 Emerging Market countries. With 1,204
constituents, the index covers approximately 85% of the free float-
adjusted market capitalization in each country. See ``MSCI Emerging
Markets Index ((USD)'' available at https://www.msci.com/documents/
10199/c0db0a48-01f2-4ba9-ad01-
226fd5678111#:~:text=COUNTRY%20WEIGHTS%0AChina%2023.76%25%0ATaiwan%20
22.5%25%0ASouth%20Korea%2018.08%25%0AIndia%2012.82%25%0ABrazil%204.56
%25%0AOther%2018.26%25.
\13\ See PitchBook, ``Chinese Companies Flock to US Exchanges
Despite Heightened Tensions'' dated Aug. 29, 2025, available at
<a href="https://arc-group.com/chinese-companies-listing-united-states/">https://arc-group.com/chinese-companies-listing-united-states/</a>; see
also ARC Group, ``Trend of Chinese Companies Listing in the United
States'' dated July 2, 2025, available at, <a href="https://arc-group.com/chinese-companies-listing-united-states/">https://arc-group.com/chinese-companies-listing-united-states/</a>.
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However, amidst this increase, U.S. policymakers and regulatory
agencies have voiced a range of bipartisan concerns regarding the
listing of Chinese companies on American securities exchanges, citing
risks to investors and national security. For example, in December
2020, Congress passed the Holding Foreign Companies Accountable
Act,\14\ which among other things, requires the removal of a company's
securities from U.S. exchanges if the company's auditor cannot be fully
inspected by the Public Company Accounting Oversight Board (``PCAOB'')
because of a position taken by an authority in a foreign jurisdiction.
Before the passage of this law, Nasdaq also identified concerns around
the audits of Chinese companies and, in 2020, Nasdaq proposed
additional listing requirements applicable to companies from
jurisdictions that do not provide the PCAOB with access to conduct
inspections of public accounting firms that audit Nasdaq-listed
companies.\15\ At the same time, Nasdaq also proposed two other changes
seeking to address concerns with companies primarily operating in a
Restrictive Market, including Chinese companies.\16\ The PCAOB
announced that it was able to secure complete access to inspect and
investigate audit firms in the PRC in December 2022.\17\
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\14\ The Holding Foreign Companies Accountable Act requires,
among other things, that the Commission identify public companies
that have retained a registered public accounting firm to issue an
audit report where the firm has a branch or office that: (1) is
located in a foreign jurisdiction, and (2) the Public Company
Accounting Oversight Board (``PCAOB'') has determined that it is
unable to inspect or investigate completely because of a position
taken by an authority in the foreign jurisdiction. Public Law 116-
222, 134 Stat. 1063 (Dec. 18, 2020).
\15\ Securities Exchange Act Release No. 93256 (October 4,
2021), 86 FR 56338 (October 8, 2021) (approving SR-NASDAQ-2021-007,
which replaced SR-Nasdaq-2020-027, Securities Exchange Act Release
No. 89027 (June 8, 2020), 85 FR 35962 (June 12, 2020)). See also
Nasdaq Rule 5005(a)(37), defining a ``Restrictive Market'' as ``a
jurisdiction that does not provide the Public Company Accounting
Oversight Board with access to conduct inspections of public
accounting firms that audit Nasdaq-listed companies'' and Rule
5210(k) imposing additional requirements on any company that
principally administers its business in a Restrictive Market.
\16\ Securities Exchange Act Release No. 89028 (June 8, 2020),
85 FR 35967 (June 12, 2020) (SR-NASDAQ-2019-026) and Securities
Exchange Act Release No. 88987 (June 2, 2020), 85 FR 34774 (June 8,
2020) (SR-NASDAQ-2020-028). These proposals were withdrawn based, in
part, on concerns expressed by the Commission Staff about whether
the proposals were ``consistent with Section 6(b)(5) of the Exchange
Act and its requirement, among other things, that the rules of a
national securities exchange not be designed to permit unfair
discrimination.'' See Letters from Arnold Golub to Vanessa A.
Countryman (February 1, 2021) available at <a href="https://www.sec.gov/comments/sr-nasdaq-2020-026/srnasdaq2020026-8324959-228601.pdf">https://www.sec.gov/comments/sr-nasdaq-2020-026/srnasdaq2020026-8324959-228601.pdf</a>
(withdrawing SR-Nasdaq-2020-026) and <a href="https://www.sec.gov/comments/sr-nasdaq-2020-028/srnasdaq2020028-8324961-228602.pdf">https://www.sec.gov/comments/sr-nasdaq-2020-028/srnasdaq2020028-8324961-228602.pdf</a> (withdrawing
SR-Nasdaq-2020-028).
\17\ FACT SHEET: PCAOB Secures Complete Access to Inspect,
Investigate Chinese Firms for First Time in History (December 15,
2022) (available at <a href="https://pcaobus.org/news-events/news-releases/vnews-release-detail/fact-sheet-pcaob-secures-complete-access-to-inspect-investigate-chinese-firms-for-first-time-in-history">https://pcaobus.org/news-events/news-releases/vnews-release-detail/fact-sheet-pcaob-secures-complete-access-to-inspect-investigate-chinese-firms-for-first-time-in-history</a>).
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More recently, bills introduced in Congress have continued to raise
bipartisan concerns about broker-dealers affiliated with China and the
risks that China's financial sector poses to U.S. and global financial
systems.\18\ In February 2025, the U.S. Government put forth the
``America First Investment Policy'' which outlined economic and
national security concerns with certain Chinese companies seeking
investments in the United States and described various actions the U.S.
Government would take with respect to Chinese companies. These actions
included preventing U.S. companies and investors from investing in
industries that advance China's national Military-Civil Fusion
strategy.\19\
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\18\ See, e.g., the PRC Broker-Dealers and Investment Advisers
Moratorium Act, S.2552 (119th Congress); the China Financial Threat
Mitigation Act of 2025, H.R. 1549 and S. 1113 (119th Congress).
\19\ According to the U.S. State Department, ``Military-Civil
Fusion,'' is an aggressive, national strategy of the Chinese
Communist Party intended to enable China to develop the most
technologically advanced military in the world. See also America
First Investment Policy, The White House (February 21, 2025),
available at <a href="https://www.whitehouse.gov/presidential-actions/2025/02/america-first-investment-policy/">https://www.whitehouse.gov/presidential-actions/2025/02/america-first-investment-policy/</a>.
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In May 2025, the financial officers of 23 states wrote a letter to
Chairman Atkins highlighting concerns with the listing of Chinese
companies. The letter noted that ``China's actions create an
environment ripe for fraud and abuse increasing the likelihood that
China-based, U.S.-listed companies will violate the disclosure,
auditing, or antifraud provisions of the Securities Exchange Act.''
\20\ Congress members also wrote to Chair Atkins in May 2025 expressing
security and human rights concerns and provided specific

[[Page 29185]]

examples of Chinese companies under the control of the Chinese
Communist Party (the ``CCP'').\21\ This letter highlighted a number of
concerns with Chinese companies that are not common to companies in
other foreign jurisdictions. The letter asserted that because of the
CCP's authority over companies, ``no company is truly private'' in the
PRC, and that the CCP systematically conceals its control from U.S.
investors. For example, in August 2025, it was announced that the CCP
had expelled former senior officials accused of making millions from
insider trading based on their access to share listings for
subsidiaries of Chinese state-owned companies listed on China's two
principal stock exchanges.\22\
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\20\ See Letter from Adam Crum, Alaska Commissioner of Revenue,
et al. to The Honorable Paul Atkins (May 20, 2025) available at,
<a href="https://sfof.com/wp-content/uploads/2025/05/Delisting-Letter.pdf">https://sfof.com/wp-content/uploads/2025/05/Delisting-Letter.pdf</a>
(highlighting concerns arising from the PCAOB audit inspections of
major accounting firms in China).
\21\ Letter from Congressmen John Moolenaar and Rick Scott, et
al. to The Honorable Paul Atkins (May 2, 2025) available at <a href="https://chinaselectcommittee.house.gov/sites/evo-subsites/selectcommitteeontheccp.house.gov/files/evo-media-document/SEC%20Letter%20Updated%20compressed.pdf">https://chinaselectcommittee.house.gov/sites/evo-subsites/selectcommitteeontheccp.house.gov/files/evo-media-document/SEC%20Letter%20Updated%20compressed.pdf</a> (the ``Congressional
Letter'').
\22\ Richard Spencer (The Times), ``China Purges Insider Traders
After [pound]30m Raid on Official's Home'' (August 20, 2025),
available at <a href="https://www.thetimes.com/world/asia/article/china-purges-insider-traders-after-30m-raid-on-officials-home-hsk0jvcgp">https://www.thetimes.com/world/asia/article/china-purges-insider-traders-after-30m-raid-on-officials-home-hsk0jvcgp</a>.
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In December 2025, Chairman Atkins explained during an interview
that the Commission is tightening scrutiny of Chinese firms in U.S.
markets to ensure ``our rules . . . are complied with and that our laws
are complied with'' as companies ``operating in China'' list shares in
the United States.\23\ Chairman Atkins went on to note that the SEC has
identified close to a dozen Chinese companies that showed ``indications
of manipulative behavior'' and involvement in ``ramp-and-dump''
schemes. He made clear that the foreign private issuers that pose a
risk to U.S. investors were mainly incorporated outside of China, while
the issuer maintained operations in China, or elsewhere in Asia, while
the primary listing was in the U.S.\24\
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\23\ See Kristen Altus (Fox Business), ``SEC Chairman Paul
Atkins Says Agency Tightening Scrutiny of Chinese Firms Listing in
US Markets'' (December 3, 2025), available at <a href="https://www.foxbusiness.com/politics/sec-chairman-paul-atkins-says-agency-tightening-scrutiny-chinese-firms-listing-us-markets.amp">https://www.foxbusiness.com/politics/sec-chairman-paul-atkins-says-agency-tightening-scrutiny-chinese-firms-listing-us-markets.amp</a>.
\24\ Id.
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The Commission also has recognized that ``China's legal system is
substantially different from the legal system in the United States and
may raise risks and uncertainties concerning the intent, effect, and
enforcement of its laws, rules, and regulations . . .'' \25\ Investors
that incur losses from malfeasance and successfully obtain judgements
against Chinese companies and their officers and directors located in
China may face greater difficulties in enforcing and collecting on
those judgements. Further, in September 2025, the Commission announced
the creation of a cross-border task force which will focus on market
manipulation and other securities law violations involving foreign
jurisdiction, specifically naming China as a country where governmental
control and other factors pose unique investor risks.\26\ Nasdaq shares
similar concerns regarding manipulation and potential securities law
violations. Additionally, it has also been reported that China's
securities regulator, the China Securities Regulatory Commission, has
taken action to prohibit small company Chinese listings in the U.S.
based on ``concerns over excessive speculation on New York-listed
Chinese stocks.'' \27\
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\25\ ``Disclosure Considerations for China-Based Issuers''
available at <a href="https://www.sec.gov/rules-regulations/staff-guidance/disclosure-guidance/disclosure-considerations-china-based-issuers">https://www.sec.gov/rules-regulations/staff-guidance/disclosure-guidance/disclosure-considerations-china-based-issuers</a>.
The Commission notes that staff reports, statistics, and other staff
documents (including those cited herein) represent the views of
Commission staff and are not a rule, regulation, or statement of the
Commission. The Commission has neither approved nor disapproved the
content of these documents and, like all staff statements, they have
no legal force or effect, do not alter or amend applicable law, and
create no new or additional obligations for any person.
\26\ See Press Release, ``SEC Announces Formation of Cross-
Border Task Force to Combat Fraud'' (September 5, 2025) available
at, <a href="https://www.sec.gov/newsroom/press-releases/2025-113-sec-announces-formation-cross-border-task-force-combat-fraud">https://www.sec.gov/newsroom/press-releases/2025-113-sec-announces-formation-cross-border-task-force-combat-fraud</a>.
\27\ See China Puts Brakes on US Stock Listings for Homegrown
Companies, Financial Times (February 27, 2025), available at <a href="https://www.ft.com/content/a5640320-7ed3-47c5-b9a1-2c0d600170be">https://www.ft.com/content/a5640320-7ed3-47c5-b9a1-2c0d600170be</a>.
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Although concerns may exist with the trading of companies from any
foreign jurisdiction, companies headquartered, incorporated or whose
business is principally administered in China are more frequently the
subject of trading concerns than those from other regions. For example,
based on data covering the period of August 2022 to April 2025, 70% of
the matters where Nasdaq referred concerns about potential manipulation
to the SEC or FINRA were related to trading in Chinese emerging market
companies and the number of referrals increased each year during this
time period.\28\ During the same time period, Chinese companies
represented less than 10% of all Nasdaq listings.\29\ Nasdaq believes
that these trading concerns are due, in part, to the companies listing
through an initial public offering (``IPO'') or business combination
with a small offering size or a low public float percentage, which,
together with the other concerns identified above about companies from
China, result in the company not attracting market attention nor
developing sufficient public float, investor base, and trading interest
to provide the depth and liquidity necessary to promote fair and
orderly trading. As a result, the securities may trade infrequently, in
a more volatile manner and with a wider bid-ask spread, all of which
may result in trading at a price that may not reflect their true market
value. These factors, in concert with the risks specific to Chinese
companies under CCP authority, make the securities more susceptible to
price manipulation by bad actors due to insider trading. The erosion of
investor confidence and the risk to investors in such cases may be
compounded if regulatory investigations into price manipulation,
insider trading and compliance concerns are impeded. For example, U.S.
investors and exchanges may not be made aware of CCP ownership in
certain Chinese companies. Additionally, investor protections and
remedies may be limited due to obstacles encountered by U.S.
authorities in bringing or enforcing actions against entities and
individuals in China involved in potentially manipulative trading
activities. Collectively, these Congressional bills, letters and
findings raise significant concerns, which Nasdaq shares, and support
the imposition of stricter initial listing requirements for Chinese
companies.\30\
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\28\ The total number of referrals to the SEC or FINRA was 10 in
2022, 8 in 2023, 52 in 2024, 91 in 2025. To date, 46 referrals have
been made for 2026.
\29\ Nasdaq vigorously regulates trading on its marketplace and
brings appropriate enforcement action against its trading members.
However, due to U.S. market structure, where trading in listed
securities takes place across all equities exchanges and on off-
exchange venues, Nasdaq does not have insight into all trading
activity in listed securities and must refer matters involving
cross-market trading to other U.S. regulators, including the SEC and
FINRA.
\30\ Since the initial proposal of this filing, Nasdaq has also
proposed and implemented additional rules, which may help address
concerns raised by state and congressional leaders. See Nasdaq Rule
IM-5101-3, allowing Nasdaq to use its authority under Rule 5101 to
deny initial listing based on factors that make a company's
securities susceptible to manipulation. See also Exchange Act
Release No. 104450 (December 18, 2025), 90 FR 60184 (December 23,
2025) (modifying Rules 5405(b)(1)(C) and 5505(b)(3)(C) to increase
the minimum Market Value of Unrestricted Publicly Held Share for
initial listing). This proposal seeks areas of concern that may not
be adequately addressed within the existing Nasdaq rules.
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For these reasons, and as described more fully below, Nasdaq
proposes to require that, in the case of an IPO, China-based companies
must offer a minimum number of securities through

[[Page 29186]]

a Firm Commitment Offering \31\ in the United States to public holders
that will result in gross proceeds to the company of at least $25
million. In addition, as described in detail below, Nasdaq also
proposes to adopt additional requirements for Chinese companies that
are currently trading on the over-the-counter (``OTC'') market or
another national securities exchange and are seeking to list in
connection with the rules applicable to a business combination and for
companies seeking to list in connection with a Direct Listing.
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\31\ The term ``Firm Commitment Offering'' shall have the
meaning as set forth in Rule 5005(a)(17), which means an offering of
securities by participants in a selling syndicate under an agreement
that imposes a financial commitment on participants in such
syndicate to purchase such securities.
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Identification of Companies Based in China
Nasdaq is proposing to adopt a new initial listing requirement for
companies based in China. More specifically, proposed Rule 5210(l)
would apply to any company that is headquartered or incorporated in
China (including the Hong Kong Special Administrative Region and the
Macau Special Administrative Region), or whose business is principally
administered in one of those jurisdictions. Nasdaq will determine in
which jurisdiction a company is principally administered based on the
analysis of the facts and circumstances, including if: (1) the
company's books and records are located in such jurisdiction; (2) at
least 50% of the company's assets are located in such jurisdiction; (3)
at least 50% of the company's revenues are derived from such
jurisdiction; (4) at least 50% of the company's directors are citizens
of, or reside in, such jurisdiction; (5) at least 50% of the company's
officers are citizens of, or reside in, such jurisdiction; (6) at least
50% of the company's employees are based in such jurisdiction; or (7)
the company is controlled by, or under common control with,\32\ one or
more persons or entities that are citizens of, reside in, or whose
business is headquartered, incorporated, or principally administered in
such jurisdiction.\33\ Nasdaq is proposing to broaden the criteria used
for identifying which jurisdiction a company is principally
administered from the current criteria in Listing Rule 5005(a)(37) to
better identify Chinese companies that present risks to investors.\34\
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\32\ The term ``control'' (including the terms ``controlling,''
``controlled by'' and ``under common control with'') shall have the
same meaning as set forth in 17 CFR 240.12b-2(4), which means the
possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a person, whether
through the ownership of voting securities, by contract, or
otherwise.
\33\ Several of these factors are also already used by Nasdaq
rules to determine whether a company's business is principally
administered in a ``Restrictive Market.'' See Listing Rule
5005(a)(37). The additional factors that Nasdaq would consider when
determining whether a business is principally administered in China
are supported by Nasdaq's experience in applying the Restrictive
Market definition and SEC guidance regarding foreign private issuer
status, which suggests that a foreign company may consider certain
factors when determining wither a foreign company's business is
located principally in the U.S., including the locations of: the
company's principal business segments or operations; its board and
shareholders' meetings; its headquarters; and its most influential
key executives (potentially a subset of all executives). See
Division of Corporation Finance of the SEC, Accessing the U.S.
Capital Markets--A Brief Overview for Foreign Private Issuers
(February 13, 2013), available at <a href="https://www.sec.gov/divisions/corpfin/internatl/foreign-private-issuers-overview.shtml">https://www.sec.gov/divisions/corpfin/internatl/foreign-private-issuers-overview.shtml</a>.
\34\ Nasdaq will request information from a company during the
application process where the company's public filings do not
provide sufficient information necessary to determine the
applicability of a factor.
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Nasdaq believes the risks associated with Chinese companies that
have substantial participation by Chinese investors, combined with
insiders retaining significant ownership, and the potential hidden
ownership of the CCP cited in the Congressional Letter,\35\ does not
promote sufficient investor base and trading interest to support fair
and orderly trading in the secondary market. Furthermore, as more
Chinese companies seek to list on U.S. exchanges, the risk to U.S.
investors due to the limited ability for U.S. regulators to conduct
inspections and investigations or bring or enforce actions against
entities and individuals involved in potentially manipulative trading
activities in securities from Chinese companies, create compliance
concerns. Therefore, the new initial listing requirements, specifically
for Chinese companies, are intended to increase investor protections by
strengthening the requirements for such companies to list on Nasdaq and
to ensure sufficient liquidity exists for meaningful price discovery.
---------------------------------------------------------------------------

\35\ See Congressional Letter, supra note 21.
---------------------------------------------------------------------------

When determining whether a company is principally administered in
one of the jurisdictions, Nasdaq will consider the seven elements
holistically, recognizing that there are various factors to consider
when determining which jurisdiction a company conducts its principal
business activities. For example, Company X could be incorporated in
Country Y and its headquarters could be located in Country Z, while at
least half of its senior management, employees, and assets are located
in China. If Company X applies to list its Primary Equity Security on
Nasdaq in connection with an IPO, Nasdaq would consider Company X's
business to be principally administered in China, and Company X would
therefore be subject to the proposed additional requirements applicable
to a Chinese company. Nasdaq would also consider a company to be
principally administered in China if, for example, the company's book
and records are located in the Hong Kong Special Administrative Region
and at least half of the company's revenues are derived from the Macau
Special Administrative Region. Where Nasdaq determines that a company
is headquartered or incorporated in China (including the Hong Kong
Special Administrative Region and the Macau Special Administrative
Region), or that the company's business is principally administered in
one of those jurisdictions, and the company does not satisfy the
additional requirements described, Nasdaq would deny the company's
listing application, and the company could appeal Nasdaq's
determination pursuant to the Rule 5800 Series.
Minimum Offering Size for an IPO
The substantive change being proposed is to adopt new Rule
5210(l)(i), which would require that a company that falls under Rule
5210(l) (a ``China-based Issuer'') and is conducting an IPO must offer
a minimum amount of securities in a Firm Commitment Offering \36\ in
the United States to Public Holders \37\ that will result in gross
proceeds to the company of at least $25 million. This proposed amount
is the same as the requirement for companies that administer their
business in a Restrictive Market, while other companies seeking to list
on the Nasdaq Capital Market (``NCM'') through an IPO must satisfy the
$15 million Market Value of Unrestricted Publicly Held Shares \38\ from
their offering proceeds. A

[[Page 29187]]

company that falls under proposed Rule 5210(l) will also need to comply
with all other applicable listing requirements.
---------------------------------------------------------------------------

\36\ Rule 5005(a)(17) defines ``Firm Commitment Offering'' as
``an offering of securities by participants in a selling syndicate
under an agreement that imposes a financial commitment on
participants in such syndicate to purchase such securities.''
\37\ Rule 5005(a)(36) defines ``Public Holders'' as ``holders of
a security that includes both beneficial holders and holders of
record, but does not include any holder who is, either directly or
indirectly, an Executive Officer, director, or the beneficial holder
of more than 10% of the total shares outstanding.''
\38\ Rule 5005(a)(46) defines ``Unrestricted Publicly Held
Shares'' as the Publicly Held Shares that are Unrestricted
Securities. Rule 5005(a)(35) defines ``Publicly Held Shares'' as
shares not held directly or indirectly by an officer, director or
any person who is the beneficial owner of more than 10 percent of
the total shares outstanding. Rule 5005(a)(47) defines
``Unrestricted Securities'' as securities that are not Restricted
Securities and Rule 5005(a)(38) defines ``Restricted Securities'' as
securities that are subject to resale restrictions for any reason,
including, but not limited to, securities: (1) acquired directly or
indirectly from the issuer or an affiliate of the issuer in
unregistered offerings such as private placements or Regulation D
offerings; (2) acquired through an employee stock benefit plan or as
compensation for professional services; (3) acquired in reliance on
Regulation S, which cannot be resold within the United States; (4)
subject to a lockup agreement or a similar contractual restriction;
or (5) considered ``restricted securities'' under Rule 144.
---------------------------------------------------------------------------

The Exchange has observed that China-based Issuers listing on
Nasdaq in connection with an IPO with an offering size below $25
million have a higher rate of compliance concerns. Nasdaq believes that
these higher rates of concern may be mitigated by requiring that the
company conduct a Firm Commitment Offering of at least $25 million.
Firm Commitment Offerings typically involve a book building process
that helps to generate an investor base and trading interest that
promotes sufficient depth and liquidity to help support fair and
orderly trading on the Exchange. Such offerings also typically involve
more due diligence by the broker-dealer than would be done in
connection with a best-efforts offering, which helps to ensure that
third parties subject to U.S. regulatory oversight are conducting
significant due diligence on the company, its registration statement
and its financial statements. The Exchange believes that the proposal
will help ensure that China-based Issuers seeking to list on the
Exchange have sufficient investor base to support fair and orderly
trading on the Exchange.
In developing the Proposal, Nasdaq analyzed the data behind its
observations. An analysis of IPOs from August 2022 to April 2025 found
that of the 151 China-based Issuers listed on Nasdaq through an IPO,
143 of such companies would not have qualified under proposed Rule
5210(l)(i) because they had offering amounts less than $25 million.\39\
Relatedly, nearly half of these 143 companies were cited for failure to
comply with Nasdaq's continued listing standards.
---------------------------------------------------------------------------

\39\ All 151 companies were headquartered or incorporated in
China.
---------------------------------------------------------------------------

This data illustrates the growing concerns with China-based Issuers
listing on U.S. exchanges and the increased risk to U.S. investors,
including the risk of quickly becoming non-compliant with the listing
requirements and therefore facing delisting. Therefore, the Exchange
believes that requiring a Firm Commitment Offering with proceeds to the
company of at least $25 million will mitigate these concerns and
provide greater support for a China-based Issuer's price, as determined
through the offering, and will help assure that there will be
sufficient liquidity, U.S. investor interest and distribution to
support price discovery and fair and orderly trading on the Exchange
once a security is listed.
Minimum Market Value of Publicly Held Shares for a Business Combination
In the case of a business combination, as described in Rule 5110(a)
or IM-5101-2(b),\40\ Nasdaq believes that such transactions when
involving China-based Issuers, present similar risks to U.S. investors
as IPOs of China-based Issuers. However, such a business combination
would typically not involve an offering. Therefore, Nasdaq is proposing
to adopt a new Rule 5210(l)(ii) that would impose a similar new
requirement as applicable to IPOs but would reflect that the listing
would not typically be accompanied by an offering. Specifically,
proposed Rule 5210(l)(ii) would require a China-based Issuer that has
gone through a business combination to have a minimum Market Value of
Unrestricted Publicly Held Shares equal to at least $25 million.
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\40\ Rule 5110(a) relates to business combinations with non-
Nasdaq entities resulting in a change of control. Rule IM-5101-2(b)
relates to a business combination with an acquisition company, which
is a company whose business plan at the time of its initial listing
is to complete an IPO and engage in a merger or acquisition with one
or more unidentified companies within a specific period of time.
---------------------------------------------------------------------------

Market Value of Unrestricted Publicly Held Shares excludes
securities subject to resale restrictions from the calculation of
Publicly Held Shares because securities subject to resale restrictions
are not freely transferrable or available for outside investors to
purchase and therefore do not truly contribute to a security's
liquidity upon listing. Nasdaq believes that requiring a post-business
combination entity headquartered or incorporated in China, or whose
business is principally administered in China, to have a minimum Market
Value of Unrestricted Publicly Held Shares of at least $25 million
would help to provide an additional assurance that there are sufficient
freely tradable shares and investor interest to support fair and
orderly trading on the Exchange. Nasdaq believes that this will help
mitigate the unique risks that China-based Issuers present to U.S.
investors due to barriers on access to information and limitations on
U.S. regulators to conduct investigations or bring or enforce actions
against the company and non-U.S. persons. Also mitigated are concerns
about the accuracy of disclosures, accountability and access to
information. Adopting this additional requirement will help prevent
China-based Issuers from using a business combination to avoid the
requirement being imposed on IPOs.
Direct Listings of Chinese Companies
In the case of a Direct Listing \41\ (as defined in Rule IM-5315-1)
Nasdaq is proposing to adopt Rule 5210(l)(iii) which requires a Chinese
company to meet all applicable listing requirements for the Nasdaq
Global Select Market (``NGS'') and the additional requirements of Rule
IM-5315-1. However, a company whose business is headquartered,
incorporated, or principally administered in China (including the Hong
Kong Special Administrative Region and the Macau Special Administrative
Region) will not be permitted to list on the Nasdaq Global Market
(``NGM'') or the NCM in connection with a Direct Listing,
notwithstanding that the Company may meet the applicable initial
listing requirements for the NGM or NCM and the additional requirements
of IM-5405-1 or IM-5505-1.
---------------------------------------------------------------------------

\41\ Pursuant to Nasdaq Rule IM-5315-1, a Direct Listing occurs
when a company that wishes to list on Nasdaq has sold common equity
securities in a private placement, which have not been listed on a
national securities exchange or traded in the OTC market pursuant to
FINRA Form 211 immediately prior to the initial pricing.
---------------------------------------------------------------------------

Companies seeking to list through a Direct Listing are currently
required to satisfy enhanced listing standards to determine compliance
with the price-based listing requirements pursuant to Rules IM-5315-1
(NGS), IM-5405-1 (NGM) and IM-5505-1 (NCM). If a company's security
that is seeking to list on NGS, NGM or NCM has had sustained recent
trading in a Private Placement Market,\42\ Nasdaq may attribute a
Market Value of Unrestricted Publicly Held Shares equal to the lesser
of (i) the value calculable based on a Valuation performed by an
independent valuation agent pursuant to Rule IM-5315-1(f) and (ii) the
value calculable based on the most recent trading price in the Private
Placement Market.\43\

[[Page 29188]]

Nasdaq believes that the price from such sustained trading in the
Private Placement Market for the company's securities is predictive of
the price in the market for the common stock that will develop upon
listing of the securities on Nasdaq, and that qualifying a company
based on the lower of such trading price or the Valuation helps assure
that the company satisfies Nasdaq's listing requirements. Nasdaq may
require a company listing on the NGS that has not had sustained recent
trading in a Private Placement Market to satisfy the applicable Market
Value of Unrestricted Publicly Held Shares requirement and provide a
Valuation evidencing a Market Value of Publicly Held Shares of at least
$250,000,000.\44\ For a company that has not had sustained recent
trading in a Private Placement Market and that is applying to list on
the NGM or NCM, Nasdaq will generally require the company to provide a
Valuation that demonstrates a price, Market Value of Listed Securities
and Market Value of Unrestricted Publicly Held Shares that exceeds 200%
of the otherwise applicable requirement.\45\
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\42\ A ``Private Placement Market'' is defined as a trading
system for unregistered securities operated by a national securities
exchange or a registered broker-dealer. See Rule 5005(a)(34).
\43\ See IM-5315-1(a)(1) (NGS), IM-5405-1(a)(1) (NGM) and IM-
5505-1 (NCM). The Valuation must be provided by an entity that has
significant experience and demonstrable competence in the provision
of such valuations. The Valuation must be of a recent date as of the
time of the approval of the Company for listing and the evaluator
must have considered, among other factors, the annual financial
statements required to be included in the registration statement,
along with financial statements for any completed fiscal quarters
subsequent to the end of the last year of audited financials
included in the registration statement. Nasdaq will consider any
market factors or factors particular to the listing applicant that
would cause concern that the value of the Company had diminished
since the date of the Valuation and will continue to monitor the
Company and the appropriateness of relying on the Valuation up to
the time of listing. Nasdaq may withdraw its approval of the listing
at any time prior to the listing date if it believes that the
Valuation no longer accurately reflects the company's likely market
value.
\44\ See IM-5315-1(b).
\45\ See IM-5405-1(a)(2) (NGM); Rule IM-5505-1(a)(2) (NCM).
---------------------------------------------------------------------------

Historically, Nasdaq has not observed any companies seeking to list
in connection with a Direct Listing that have had sustained recent
trading in a Private Placement Market. In the absence of sustained
recent trading in the Private Placement Market, a company seeking to
list on NGS is required to demonstrate a Market Value of Publicly Held
Shares of at least $250 million and a Market Value of Unrestricted
Publicly Held Shares of at least $100 million.\46\ On the other hand, a
company conducting a Direct Listing on NGM or NCM can list with a
Market Value of Unrestricted Publicly Held Shares as low as $30
million, with that amount calculated based on an independent third-
party valuation of the company. Because a Direct Listing does not raise
any offering proceeds and typically does not involve an underwriter to
market the transaction and help develop distribution and investor
interest, Nasdaq does not believe that the NGM and NCM minimum of $30
million in Unrestricted Publicly Held Shares is sufficient for China-
based Issuers to support meaningful price discovery and fair and
orderly trading. In that regard, Nasdaq notes that the valuation on
which the amount of Unrestricted Publicly Held Shares is derived is
subjective and the $30 million requirement is just barely above the $25
million offering proceeds that would be required in an IPO. As
discussed above, Nasdaq believes that China-based Issuers present
unique risks to U.S. investors and therefore precluding a China-based
Issuer from listing through a Direct Listing on the NGM and NCM will
help to ensure that the company has sufficient public float, investor
base, and trading interest likely to generate depth and liquidity
necessary to promote fair and orderly trading on the secondary market.
Adopting this additional requirement also will help prevent companies
from using a Direct Listing to avoid the requirement being imposed on
IPOs.
---------------------------------------------------------------------------

\46\ A company can list with a Market Value of Unrestricted
Publicly Held Shares of at least $100 million if the company also
has stockholders' equity of at least $110 million; otherwise the
company is required to have Market Value of Unrestricted Publicly
Held Shares of at least $110 million. See Rule 5315(f)(2).
---------------------------------------------------------------------------

Transfer of a Chinese Company Listing
Nasdaq notes that other markets do not have comparable requirements
to what is being proposed. Therefore, China-based Issuers that do not
meet the heightened requirements of proposed Rule 5210(l) may elect to
list on those other markets. Nasdaq believes that a China-based Issuers
initially trading on the OTC market or listing on another national
securities exchange and then quickly transferring to Nasdaq may present
similar risks to U.S. investors as IPOs of China-based Issuers.
Therefore, Nasdaq proposes to adopt Rule 5210(l)(iv), which would
require a China-based Issuer that transfers from the OTC market or from
another national securities exchange to first trade on that other
market for at least one year before it is eligible to list on Nasdaq.
This prerequisite will provide sufficient time for the company to
establish a trading history and publicly disclose the result of
operations, upon which investors can rely, and minimizes the risk that
companies are utilizing the OTC market or another national securities
exchange solely to circumvent Nasdaq's proposed requirements for China-
based Issuers.\47\ In addition, like the requirement proposed for
companies listing in connection with a business combination, Nasdaq
proposes that these seasoned companies, which will be listing without
an offering, must have a minimum Market Value of Unrestricted Publicly
Held Shares of at least $25 million to ensure that a security to be
listed on Nasdaq has adequate liquidity, distribution and U.S. investor
interest. Elements of the proposed requirements for a China-based
Issuer that transfers from the OTC market are similar to the current
Rule 5210(k), applicable to Restrictive Market Companies,\48\ and the
one-year seasoning requirement for companies formed by a Reverse Merger
under current Rule 5110(c)(1)(A), each of which provides for a period
that a company must trade on another market before it can list on
Nasdaq, and each of which was found by the Commission to be consistent
with the Act.
---------------------------------------------------------------------------

\47\ Companies trading in the OTC Market at the time of
application must also satisfy a minimum average daily trading volume
before listing. See Listing Rules 5405(a)(4) and 5505(a)(5).
\48\ Unlike the requirement for Restrictive Markets, the
proposed rules do not include an alternative allowing companies to
list if the proceeds from the offering would represent at least 25%
of the Company's post-offering Market Value of Listed Securities. In
applying that alternative in connection with the Restrictive Market
requirements, Nasdaq observed that the alternative allowed smaller
companies to list without achieving the rule's liquidity objectives
of supporting meaningful price discovery.
---------------------------------------------------------------------------

Implementation Timeline and Other Changes
In order to provide companies with a reasonable opportunity to
adjust to the proposed changes, Nasdaq is proposing a delay of 30 days
after Commission approval before the changes become effective.
Therefore, companies listing on or after 30 days from the date the
Commission's approval order must comply with the proposed rules. This
will allow companies that have taken substantial steps to list under
the current rules to complete the process. Nasdaq also proposes to
renumber the remainder of Rules 5210 as subsections (m) and (n) and
update the cross-reference in Rule 1031(b) to ensure consistency in its
rulebook.
Nasdaq will issue a denial letter where it concludes that a company
is headquartered or incorporated in China (including the Hong Kong
Special Administrative Region and the Macau Special Administrative
Region), or whose business is principally administered in one of those
jurisdictions, and the company does not meet the additional
requirements applicable to its type of listing. A

[[Page 29189]]

company can request a review of that denial letter pursuant to Rule
5815.
Comment Letters
The Commission received several comment letters in response to its
solicitation of comments about the proposed changes. Three commenters
expressed general support for the proposal \49\ while others expressed
concern that the proposal unfairly singles out China-based companies
and is inconsistent with recent U.S.-China regulatory cooperation.\50\
---------------------------------------------------------------------------

\49\ See Letter from Emmanual Tamrat, Senior Research Analyst,
Council of Institutional Investors, dated Oct. 10, 2025 (``CII
Letter 1''); see also Letter from Emmanual Tamrat, Senior Research
Analyst, Council of Institutional Investors, dated Jan. 13, 2026
(``CII Letter 2''); Letter from Jeffrey Starr, Managing Director,
Head of Operations, Charles Schwab & Co., dated Dec. 16, 2025
(``Schwab Letter''); Letter from Hunter Taubman Fischer & Li LLC,
dated Sept. 16, 2025 (``HTFL Letter'').
\50\ See Letter from Beijing Guo Huan Law Firm, dated Jan. 4,
2026 (``Beijing Guo Han Letter''); Letter from Joseph Wilson, Esq.
at 2-3, Bevilacqua PLLC, dated Oct. 10, 2025 (``Bevilacqua Letter
1''); Letter from Joseph Wilson, Esq. at 3, Bevilacqua PLLC, dated
Jan. 13, 2026 (``Bevilacqua Letter 2''); Letter from USA World
Management Group LTD, dated Dec. 30, 2025 (``USA World Letter'');
Letter from US International Finance Foundation, dated Jan. 4, 2026
(``USIFF Letter''); Letter from Sen Time Studio, dated Dec. 28, 2025
(``SEN Time Studio Letter''); Hong Kong United Business Consulting
Limited, dated Jan. 13, 2026 (``HKUBC Letter''); Letter from HIGO
Global Technology, Inc. dated Jan. (``HIGO Letter''); Letter from US
Unicorn Foundation Inc., dated Dec. 19, 2025 (``US Unicorn
Letter''); Letter from China Listed Companies Association, dated
Jan. 14, 2026 (``China LCA Letter''); Letter from Cecilia, dated
Jan. 4, 2026 (``Cecilia Letter'').
---------------------------------------------------------------------------

Of the commenters that expressed general support, one commenter
proposed certain modifications to the proposal, noting that Chinese
citizenship alone does not signify a regulatory risk. The commenter
asserted that the current proposal ``risks unintentionally capturing
issuers that do not present the same regulatory concerns'' for which
the proposal was designed to address.\51\ This commenter suggested that
the heightened requirements should apply only to companies
``principally operating in China, rather than issuers that are based in
the U.S. simply because their founders, controlling persons, directors,
or officers are Chinese citizens.'' \52\ This commenter also suggested
extending the transition period for compliance with the proposal from
30 days to 60 days for issuers with pending initial listing
applications.\53\ Another commenter that supported the proposal
recommended that ``the increased standards should apply to companies
based in additional foreign jurisdictions where it is determined there
are elevated levels of fraud'' to prevent fraudsters from ``simply
mov[ing] to other jurisdictions where it's even easier to commit
fraud.'' \54\ Finally, a third commenter in general support of the
proposal noted that the proposal takes ``meaningful steps to preserve
market integrity and protect U.S. investors from potential losses
associated with the smallest microcap Chinese companies.'' \55\ This
commenter also suggests ``expanding the application of the proposed
rule to the smallest microcap companies generally, including those
companies incorporated in the Cayman Islands.'' \56\
---------------------------------------------------------------------------

\51\ See HTFL Letter at 2.
\52\ Id.
\53\ Id.
\54\ See Schwab Letter at 4.
\55\ See CII Letter 2 at 2.
\56\ Id. at 2-4.
---------------------------------------------------------------------------

Nasdaq recognizes that there are various factors to consider when
determining where a company conducts its principal business activities
and believes that the location and citizenship of the company's
founders, controlling persons, directors, or officers is an important
factor. The presence of one factor will not automatically result in a
determination that the issuer is a China-based Issuer. Rather, as
discussed above, Nasdaq will consider the seven elements holistically
when determining whether a company is principally administered in one
of the subject jurisdictions and the location and citizenship of
associated persons will be considered in the context of the other
factors.
With respect to the request for a longer transition period, Nasdaq
notes that the initial proposal was published in September 2025, which
has provided issuers with pending listing applications with sufficient
time to prepare for the heightened listing standards. Therefore, Nasdaq
is not amending the transition period for compliance. Additionally,
Nasdaq intends that the proposal will capture China-based Issuers that
are typically cited for compliance issues. Based on the data discussed
above, Nasdaq does not believe that a country-specific rule is
necessary for any other country at this time, and that its current
listing standards, including rules recently adopted to increase the
initial listing requirements and accelerate delisting of non-compliant
companies, are sufficient to address the commenters' concerns related
to companies in other jurisdictions.\57\ Nasdaq is limiting the
proposed listing standards to China-based Issuers based on the concerns
that Nasdaq, along with U.S. policymakers and regulatory agencies, have
observed with such companies. Further, Nasdaq notes that it recently
adopted Listing Rule IM-5101-3, which provides greater ability for
Nasdaq to deny listing to companies from other jurisdictions that meet
all stated listing requirements based on, among other things,
considerations related to the company's advisors (including auditors,
underwriters, law firms, brokers, clearing firms, or other professional
service providers) or concerns Nasdaq has identified with other
previously listed companies that are similarly situated to the company.
Additionally, Listing Rule IM-5101-3 provides a qualitative description
of factors related to Nasdaq's use of discretion in denying an initial
listing, including where a company is located, and whether the company
is in a jurisdiction where there are limited legal remedies to U.S.
shareholders. Nasdaq believes Listing Rule IM-5101-3 helps to address
commenters' desire to extend the proposal to other jurisdictions.
However, unlike Rule IM-5101-3, the proposed rule specifies a minimum
threshold of $25 million Firm Commitment Offering for IPOs and a $25
million minimum Market Value of Unrestricted Publicly Held Shares
following the business combination, for Chinese companies. Nasdaq
believes the $25 million minimum threshold is reasonable and necessary
because the data has shown that China-based Issuers below the threshold
have a higher rate of compliance concerns, which may be mitigated by a
higher threshold because Firm Commitment Offerings typically generates
an investor base and trading interest that promotes sufficient depth
and liquidity to help support fair and orderly trading on the Exchange.
Additionally, Firm Commitment Offerings typically involve more due
diligence by the broker-dealer which helps to ensure that third parties
subject to U.S. regulatory oversight are conducting significant due
diligence on the company. Nasdaq will also continue to monitor and will
increase listing standards to additional specific countries if
necessary.
---------------------------------------------------------------------------

\57\ See supra, note 30; Exchange Act Release No. 104318
(December 5, 2025), 90 FR 57225 (December 10, 2025) (modifying the
compliance periods available when a security's closing bid price is
below $0.10).
---------------------------------------------------------------------------

Of the commenters in opposition, most raised concerns that the
proposal violates Section 6(b)(5) of the Act by permitting unfair
discrimination among issuers by singling out China-based Issuers and
deterring qualified issuers from listing on the Exchange.\58\ Typical

[[Page 29190]]

of these comments, one commenter stated that the proposal ``would be
unlawful and make for bad policy,'' is ``not necessary or appropriate
to protect national security'' and is ``anti-competitive as it
discriminates against certain Chinese issuers imposing additional, more
onerous listing criteria on them than are imposed on other foreign
issuers.'' \59\ Other commenters also suggested that Nasdaq should
apply a more neutral and metrics-based alternative.\60\
---------------------------------------------------------------------------

\58\ See China LCA Letter; Bevilacqua Letter; HKUBC Letter;
Beijing Guo Han Letter at 2-3; USA World Letter; SEN Time Studio
Letter at 4.
\59\ See Bevilacqua Letter.
\60\ See China LCA Letter at 2-3; Bevilacqua Letter at 3-4;
HKUBC Letter at 3; USA World Letter at 2-3 (suggesting increasing
listing standards for ``all issuers regardless of geographic
location,'' and ``establish[ing] objective liquidity metrics
applicable to all issuers.'').
---------------------------------------------------------------------------

While the proposal imposes heightened initial listing requirements
on China-based Issuers, Nasdaq believes the proposal is consistent with
the requirements of Section 6(b)(5) of the Act, which requires that an
Exchange's rules be designed to prohibit unfair discrimination. As
outlined above, Nasdaq and U.S. regulators and policymakers have
identified specific and serious concerns with companies that
principally operate in China, which increase the risks to investors and
make the protection of investors more difficult. These concerns include
heightened risk of fraud and manipulative behavior, hidden CCP
ownership and control, and greater difficulties enforcing laws and
rules and collecting on judgements. Thus, while the proposed rules
would provide for heightened requirements for companies that
principally operate in China, those rules are not unfairly
discriminatory and would enhance investor protection, which is a
central purpose of the Act.
Conclusion
Nasdaq believes that the U.S. exchanges can provide U.S. investors
with opportunities to diversify their portfolio by providing exposure
to emerging market companies in China. However, due to heightened risks
identified in the trading of these companies' securities, Nasdaq also
believes it is necessary to increase the requirements for these
companies to list to help provide better liquidity in their securities.
Nasdaq believes that the proposed rule changes will enhance the
liquidity available in China-based Issuers listing in the United
States, thereby making trading in the secondary market more difficult
for bad actors to manipulate while helping to balance the desirability
of China-based Issuers to access U.S. markets with necessary
protections for investors.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\61\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\62\ in particular, in that it is designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, to remove impediments to and perfect
the mechanism of a free and open market and a national market system,
and, in general to protect investors and the public interest. Further,
the Exchange believes that this proposal is not designed to permit
unfair discrimination between customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

\61\ 15 U.S.C. 78f(b).
\62\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

The Commission has previously opined on the importance of
meaningful listing standards for the protection of investors and the
public interest.\63\ In particular, the Commission has stated:
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\63\ Securities Exchange Act Release No. 102622 (March 12,
2025), 90 FR 12608 (March 18, 2025) (approving SR-Nasdaq-2024-084
adopting initial listing liquidity requirements for companies
applying to list or uplist on the NGM or NCM).
---------------------------------------------------------------------------

The development and enforcement of meaningful listing standards for
an exchange is of critical importance to financial markets and the
investing public. Among other things, such listing standards help
ensure that exchange-listed companies will have sufficient public
float, investor base, and trading interest to provide the depth and
liquidity to promote fair and orderly markets.\64\
---------------------------------------------------------------------------

\64\ Id. at 12609.
---------------------------------------------------------------------------

Nasdaq believes that the factors for determining whether a company
is based in China will assist Nasdaq in determining which companies
should be subject to the proposed new standard, which will prevent
fraudulent and manipulative acts and practices. Nasdaq also believes
that the factors are not unfairly discriminatory. The proposed factors
used to determine if a company is headquartered or incorporated in
China (including the Hong Kong Special Administrative Region and the
Macau Special Administrative Region), or whose business is principally
administered in one of those jurisdictions, are similar to the factors
contained in current Rule 5005(a)(37) and adds additional factors
because, as discussed above, China-based Issuers carry a risk of
insufficient investor base and trading interest to support fair and
orderly trading in the secondary market due to substantial
participation by Chinese investors, combined with insiders retaining
significant ownership, and the potential hidden ownership of the CCP
cited in the Congressional Letter Moreover, Nasdaq will consider the
seven elements holistically when determining whether a company is
principally administered in one of the jurisdictions. Nasdaq therefore
believes that these companies should be subject to heighted standards
for listing on Nasdaq.
Nasdaq believes that requiring a $25 million minimum offering size
for China-based Issuers seeking to list on Nasdaq through an IPO or $25
million in Unrestricted Publicly Held Shares for China-based Issuers
seeking to list on Nasdaq through a business combination or transfer
from the OTC market or another national securities exchange may
decrease the number of companies subsequently cited for compliance
issues and help ensure that a security of a China-based Issuer to be
listed on Nasdaq has adequate liquidity and distribution to support
fair and orderly trading in the secondary market, which will reduce
trading volatility and price manipulation, thereby protecting investors
and the public interest.
Additionally, Nasdaq believes that allowing China-based Issuers to
list on the NGS, rather than the NGM or NCM, in connection with a
Direct Listing, will ensure that such companies satisfy higher listing
requirements, including the minimum amount of Publicly Held Shares and
Market Value of Unrestricted Publicly Held Shares, which will help to
ensure that the security has sufficient public float, investor base,
and trading interest likely to generate depth and liquidity sufficient
to promote fair and orderly trading, thereby protecting investors and
the public interest.
Nasdaq also believes that extending the $25 million minimum
offering size and the requirement for the company to have traded for at
least one year when transferring from the OTC market or another
exchange aligns with similar listing requirements.\65\
---------------------------------------------------------------------------

\65\ See Rule 5110(c)(1)(A) (requiring a company that completed
a Reverse Merger, as defined in Rule 5005(a)(39) to trade on another
market for at least one year before being eligible to apply to
Nasdaq) and 5210(k) (requiring companies from a Restrictive Market,
as defined in Rule 5005(a)(39) to satisfy heightened listing
requirements).
---------------------------------------------------------------------------

While the proposals apply only to China-based Issuers, the Exchange
believes that the proposals are not designed to permit unfair
discrimination among companies because Nasdaq believes that trading in
China-based Issuers presents unique potential risks to U.S. investors,
including heightened susceptibility to fraud and manipulation by bad
actors, hidden CCP ownership and control, and

[[Page 29191]]

greater difficulties enforcing laws and rules and collecting on
judgements. Nasdaq believes that companies with a Firm Commitment
Offering size or a Market Value of Unrestricted Publicly Held Shares
below $25 million may not develop a sufficient investor base and
trading interest to provide the depth and liquidity necessary to
promote fair and orderly trading, resulting in a security that is
illiquid thereby amplifying these risks.
Less liquid securities also may be more susceptible to price
manipulation, as a relatively small amount of trading activity can have
an inordinate effect on market prices. Price manipulation is a
particular concern when insiders retain a significant ownership portion
of the company. Therefore, Nasdaq believes that it is not unfairly
discriminatory to treat China-based Issuers differently under these
proposals because the proposed rules will help ensure that securities
of a China-based Issuer listed on Nasdaq have sufficient investor base
and trading interest to provide the depth and liquidity necessary to
promote fair and orderly markets, thereby promoting investor protection
and the public interest.
Additionally, elements of these proposals are similar to the
current Rule 5210(k), applicable to Restrictive Market Companies, and
the one-year seasoning requirement for companies formed by a Reverse
Merger under current Rule 5110(c)(1)(A), each of which was found by the
Commission to be consistent with the Act.
Lastly, Nasdaq believes that implementing a 30-day delay from the
date of the Commission's approval order before the changes become
effective provides companies with an opportunity to adjust to the
proposed changes. The delay is not unfairly discriminatory because it
will allow companies that have taken substantial steps to list under
the current rules to complete the process. Additionally, Nasdaq also
proposes to renumber the remainder of Rule 5210 as subsections (m) and
(n) and update the cross reference to Rule 5210(m) found in Rule
1031(b) to ensure consistency in its rulebook.

B. Self-Regulatory Organization's Statement on Burden on Competition

The Exchange does not believe that the proposed rule changes will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. While the proposed rule changes
will apply only to companies primarily operating in China (including
the Hong Kong Special Administrative Region and the Macau Special
Administrative Region), Nasdaq, Congress, state financial officers and
the SEC have identified specific concerns with such companies that make
the imposition of additional initial listing criteria on such companies
appropriate to enhance investor protection, which is a central purpose
of the Act. Any impact on competition, either among listed companies or
between exchanges, is incidental to that purpose. As noted above, other
markets do not have comparable requirements to what is being proposed,
and therefore China-based Issuers may elect to list on those other
markets

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

No written comments were either solicited or received.\66\
---------------------------------------------------------------------------

\66\ The Commission notes that this section refers to Nasdaq not
soliciting or receiving comments directly.
---------------------------------------------------------------------------

IV. Discussion and Commission Findings

The Commission finds that the proposed rule change, as modified by
Amendment No. 3, is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to a national securities
exchange.\67\ In particular, the Commission finds that the proposed
rule change, as modified by Amendment No. 3, is consistent with Section
6(b)(5) of the Act,\68\ which requires, among other things, that the
rules of an exchange be designed to prevent fraudulent and manipulative
acts and practices, to promote just and equitable principles of trade,
to remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in general, to protect
investors and the public interest, and not be designed to permit unfair
discrimination between customers, issuers, brokers, or dealers; and
Section 6(b)(8) of the Act,\69\ which requires that the rules of an
exchange not impose any burden on competition that is not necessary or
appropriate in furtherance of the Act.
---------------------------------------------------------------------------

\67\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\68\ 15 U.S.C. 78f(b)(5).
\69\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

The Exchange proposes to adopt heightened initial listing standards
for China-based companies conducting an IPO, engaged in a business
combination, or transferring from another trading venue to list on
Nasdaq. The Exchange states that China-based companies present unique
risks to U.S. investors, and the heightened requirements for China-
based companies to list will help provide better liquidity in their
securities.\70\ In addition, the Exchange has proposed to prohibit
Direct Listings on the NGM and NCM of securities issued by China-based
companies due to concerns regarding liquidity and fair and orderly
trading.\71\
---------------------------------------------------------------------------

\70\ See Amendment No. 3, supra note 9, at 24-25.
\71\ See id. at 18.
---------------------------------------------------------------------------

The Commission has consistently recognized that the development and
enforcement of meaningful listing standards \72\ by an exchange is of
critical importance to financial markets and the investing public.\73\
Among other things, the Commission has stated that listing standards
provide the means for an exchange to screen issuers that seek to become
listed, and to provide listed status only to bona fide companies that
have or will have sufficient public float, investor base, and trading
interest to provide the depth and liquidity to promote fair and orderly
markets.\74\ Meaningful listing standards are also important given
investor expectations regarding the nature of securities that have
achieved an exchange listing, and the role of an exchange in overseeing
its market and assuring compliance with its listing standards.\75\
---------------------------------------------------------------------------

\72\ This reference to ``listing standards'' is referring to
both initial and continued listing standards.
\73\ See, e.g., Securities Exchange Act Release No. 57785 (May
6, 2008), 73 FR 27597 (May 13, 2008) (SR-NYSE-2008-17).
\74\ See, e.g., Securities Exchange Act Release Nos. 81856 (Oct.
11, 2017), 82 FR 48296, 48298 (Oct. 17, 2017) (SR-NYSE-2017-31);
81079 (July 5, 2017), 82 FR 32022, 32023 (July 11, 2017) (SR-NYSE-
2017-11); 65708 (Nov. 8, 2011), 76 FR 70799, 70802 (Nov. 15, 2011)
(SR-NASDAQ-2011-073); 63607 (Dec. 23, 2010), 75 FR 82420, 82422
(Dec. 30, 2010) (SR-NASDAQ-2010-137); and 57785 (May 6, 2008), 73 FR
27597, 27599 (May 13, 2008) (SR-NYSE-2008-17). The Commission has
stated that adequate listing standards, by promoting fair and
orderly markets, are consistent with Section 6(b)(5) of the Act, in
that they are, among other things, designed to prevent fraudulent
and manipulative acts and practices, promote just and equitable
principles of trade, and protect investors and the public interest.
See, e.g., Securities Exchange Act Release Nos. 82627 (Feb. 2,
2018), 83 FR 5650, 5633, n.53 (Feb. 8, 2018) (SR-NYSE-2017-30);
87648 (Dec. 3, 2019), 84 FR 67308, 67314, n.42 (Dec. 9, 2019) (SR-
NASDAQ-2019-059); and 88716 (Apr. 21, 2020), 85 FR 23393, 23395,
n.22 (Apr. 27, 2020) (SR-NASDAQ-2020-001).
\75\ See, e.g., Securities Exchange Act Release Nos. 88716 (Apr.
21, 2020), 85 FR 23393 (Apr. 27, 2020) (SR-NASDAQ-2020-001); 88389
(Mar. 16, 2020), 85 FR 16163 (Mar. 20, 2020) (SR-NASDAQ-2019-089).
See also Securities Exchange Act Release No. 81856 (Oct. 11, 2017),
82 FR 48296, 48298 (Oct. 17, 2017) (SR-NYSE-2017-31) (stating that
``[a]dequate standards are especially important given the
expectations of investors regarding exchange trading and the
imprimatur of listing on a particular market'' and that ``[o]nce a
security has been approved for initial listing, maintenance criteria
allow an exchange to monitor the status and trading characteristics
of that issue . . . so that fair and orderly markets can be
maintained'').

---------------------------------------------------------------------------

[[Page 29192]]

Focus on China-Based Companies

The Exchange's proposal provides for differential treatment of
China-based companies seeking Exchange listing as compared to companies
based in the United States or other foreign jurisdictions. The Exchange
states that trading in China-based companies presents unique potential
risk to U.S. investors, and China-based companies increasingly have
sought listings in the United States as U.S. investors have sought
exposure to companies from emerging markets, such as China.\76\ The
Exchange also states that U.S. lawmakers and regulators have identified
concerns with the listing of China-based companies, including
indications of manipulative trading of their securities, difficulty
enforcing and collecting on judgments on officers and directors in
China, and CCP control of China-based companies.\77\ The Exchange
states that, collectively, these findings raise significant concerns,
which Nasdaq shares, and support the imposition of stricter initial
listing standards for China-based companies.\78\
---------------------------------------------------------------------------

\76\ See Amendment No. 3, supra note 9, at 4, 24.
\77\ See id. at 4-9.
\78\ See id. at 9-10.
---------------------------------------------------------------------------

The Exchange further states that China-based companies are more
frequently the subject of trading and non-compliance concerns than
similarly-situated companies from other regions.\79\ According to the
Exchange, during the period of August 2022 to April 2025, it observed
that nearly 70% of the matters where Nasdaq referred concerns about
potential manipulation to the Commission or FINRA were related to
trading in Chinese emerging market companies and the number of
referrals increased during this time period.\80\ During the same time
period, Chinese companies represented less than 10% of all Nasdaq
listings.\81\ The Exchange states that it believes that these trading
concerns are due, in part, to China-based companies listing through an
IPO or business combination that have certain characteristics, such as
a small offering size or a low public float percentage, which in
combination with the other concerns identified about China-based
companies may result in the companies not attracting market attention
or developing sufficient public float, investor base, and trading
interest to provide the depth and liquidity necessary to promote fair
and orderly trading.\82\ The Exchange states that such securities may
trade infrequently, in a more volatile manner, and with a wider bid-ask
spread, all of which may result in trading at prices that may not
reflect their true market value.\83\ Furthermore, the Exchange states
that these securities may be more susceptible to price manipulation by
bad actors.\84\
---------------------------------------------------------------------------

\79\ See id. at 8.
\80\ See id.
\81\ See id.
\82\ See id. at 8-9.
\83\ See id. at 9.
\84\ See id.
---------------------------------------------------------------------------

The Exchange states that the risk to investors related to low-
priced securities issued by China-based companies may be compounded
because regulatory investigations into price manipulation, insider
trading, and compliance concerns may be impeded, and investor
protections and remedies may be limited in such cases, due to obstacles
in bringing or enforcing actions against entities and individuals in
China involved in potentially manipulative trading activities.\85\ The
Exchange states that therefore it believes that the proposal to impose
heightened initial listing standards would enhance the liquidity
available in China-based companies listing in the U.S., thereby making
trading in the secondary market more difficult to manipulate and
balancing access to China-based companies with the protection of
investors.\86\
---------------------------------------------------------------------------

\85\ See id.
\86\ See id. at 24-25.
---------------------------------------------------------------------------

Some commenters expressed general support for Nasdaq's ongoing
efforts to enhance its listing standards, including the current
proposal.\87\ One commenter stated that it supports ``Nasdaq for taking
action to preserve market integrity and protect U.S. investors from
potential losses in shareholder value resulting from the high
volatility and potential market manipulation of the smallest microcap
Chinese companies.'' \88\ This commenter stated that based on its
August 2025 report, certain China-based companies circumvent
restrictions on foreign investment in strategically sensitive sectors
and ``U.S. rules'' by using the variable interest entity (``VIE'')
structure.\89\ This commenter also stated that these companies are
``beyond the reach of enforcement actions by U.S. authorities;'' and
China-based companies that employ the VIE structure have been
associated with ``widely reported controversies that resulted in
delistings and/or losses in shareholder value.'' \90\
---------------------------------------------------------------------------

\87\ See CII Letter 1; CII Letter 2; Schwab Letter at 1. See
also HTFL Letter at 1.
\88\ CII Letter 1 at 2.
\89\ See CII Letter 2 at 3. See also id. at 5-44 (attaching
Emmanuel Tamrat, Senior Research Analyst, CII, Behind the Veil:
Risks of Chinese Companies and the VIE Structure, Aug. 2025).
\90\ Id. at 3.
---------------------------------------------------------------------------

Several commenters raised concerns that the proposal is overly
broad and unfairly discriminatory against China-based companies.\91\
One of these commenters stated that the proposal ``would be unlawful,''
is ``not necessary or appropriate to protect national security,'' and
is ``anti-competitive as it discriminates against certain Chinese
issuers.'' \92\ Several commenters stated that the proposal does not
provide adequate justification for why it does not constitute unfair
discrimination.\93\ One commenter stated that the proposal would
``deter reputable, rule-abiding enterprises from listing on the
Exchange.'' \94\ Another commenter stated that the proposal would
``establish a dangerous precedent allowing national securities
exchanges to impose heightened listing standards

[[Page 29193]]

on issuers from any disfavored jurisdiction.'' \95\
---------------------------------------------------------------------------

\91\ See Bevilacqua Letter 1 at 2-3; US Unicorn Letter at 1;
HIGO Letter at 1; SEN Time Studio Letter at 1-2; USA World Letter at
2; USIFF Letter at 1-2; Letter from United Securities Legal Group,
APC, The State Bar of California, dated Jan. 4, 2026 (``United
Securities Letter'') at 2; Cecilia Letter at 1; Guo Huan Letter at
1-4; Bevilacqua Letter 2 at 2-4; China LCA Letter at 1. One
commenter stated that the Commission should strike Nasdaq's response
to comment letters in Amendment No. 2 because Nasdaq filed Amendment
No. 2 after the deadline for rebuttal comments set forth in the OIP.
See Letter from Joseph D. Wilson, Esq. Bevilacqua PLLC, dated Apr.
21, 2026. Although the Commission acknowledges that Nasdaq filed
Amendment No. 2 after January 27, 2026, which was the deadline for
rebuttal comments set forth in the OIP, the Commission, at its
discretion, has traditionally considered comments submitted after a
comment period closes but before final action has been taken on a
proposed rule change. Accordingly, in approving this proposal, the
Commission has considered the Exchange's statements, including
responses to comment letters, in Amendment No. 3, which superseded
and replaced Amendment No. 2 in its entirely.
\92\ See Bevilacqua Letter 1 at 2-3. This commenter stated that
allowing larger companies to raise more capital would pose a greater
threat to national security; and that impediments to regulatory
investigations or actions may occur in foreign countries other than
China. See Bevilacqua Letter 2 at 3. Another commenter stated that
``Congress and the Executive Branch addressed [national security and
geopolitical concerns] through targeted statutes,'' and an exchange
listing rule is not an appropriate venue to address these issues.
See United Securities Letter at 2.
\93\ See Bevilacqua Letter 1 at 2; SEN Time Studio Letter at 1-
2. A commenter recommended that Nasdaq should conduct and publicly
disclose a quantitative assessment of the anticipated impact of the
proposed rule. See SEN Time Studio Letter at 5. Another commenter
stated that the Commission and FINRA referral statistics ``[do] not
establish causation unique to Chinese jurisdiction,'' and that the
Commission ``has previously rejected SRO attempts to impose
jurisdiction-specific restrictions when the risks are not
demonstrably unique.'' United Securities Letter at 3.
\94\ HIGO Letter at 1. Another commenter stated that the
proposal ``may exclude high-quality, compliant small and medium-
sized companies.'' SEN Time Studio Letter at 5.
\95\ United Securities Letter at 4.
---------------------------------------------------------------------------

In response to these comments, the Exchange states that Nasdaq and
U.S. regulators and policymakers have identified specific and serious
concerns with China-based companies.\96\ These concerns include
heightened risk of fraud and manipulative behavior, hidden CCP
ownership and control, and greater difficulties enforcing laws and
rules and collecting on judgments.\97\ Accordingly, the Exchange states
that it believes imposing heightened initial listing standards for
China-based companies is not unfairly discriminatory and will enhance
investor protection.\98\
---------------------------------------------------------------------------

\96\ See Amendment No. 3, supra note 9, at 24.
\97\ See id.
\98\ See id.
---------------------------------------------------------------------------

The Exchange has identified unique risks regarding China-based
companies, including a heightened susceptibility to manipulative
trading, potential governmental control of companies, and the
difficulties that may be presented when enforcing laws and rules and
collecting on judgments on entities within China. In addition, the
Exchange provided information observing that nearly 70% of the matters
the Exchange referred to the Commission or FINRA based on concerns
about potential manipulation were related to trading in Chinese
emerging market companies, while during the same period of time,
Chinese companies represented less than 10% of all Nasdaq listings.\99\
This information demonstrates that the Exchange has made a
disproportionate amount of referrals in recent years regarding
potentially manipulative trading concerning China-based companies,
supporting its belief that China-based companies pose a heightened risk
to investors. The Commission agrees that the risks to U.S. investors
associated with listing China-based companies identified by the
Exchange justify the imposition of heightened initial listing standards
on China-based companies; therefore, the Commission concludes that the
proposal is appropriately targeted in a manner that is not unfairly
discriminatory, consistent with Section 6(b)(5) of the Act, and will
not impose any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act, consistent with
Section 6(b)(8) of the Act.
---------------------------------------------------------------------------

\99\ See supra notes 80-81 and accompanying text.
---------------------------------------------------------------------------

One commenter that supported the proposal and acknowledged that the
``rate of fraud associated with Chinese firms is certainly high,''
stated that ``the increased standards should apply to companies based
in additional foreign jurisdictions where it is determined there are
elevated levels of fraud.'' \100\ This commenter stated that,
``[o]therwise, fraudsters will simply move to other jurisdictions where
it's even easier to commit fraud'' and that ``other jurisdictions also
see many instances of fraudulent activities.'' \101\ Another commenter
that supported the proposal suggested that the Exchange expand the
application of the proposed rule to ``small microcap companies,''
including those companies incorporated in the Cayman Islands.\102\
---------------------------------------------------------------------------

\100\ Schwab Letter at 4.
\101\ Id. One commenter, who opposed the proposal, stated that
market volatility and price manipulation concerns are not unique to
any geographic region. See USA World Letter at 2-3.
\102\ See CII Letter 2 at 2-4.
---------------------------------------------------------------------------

In response, the Exchange states that it does not believe that a
country-specific rule is necessary for any other country at this time
and that its current listing standards, including recently adopted
changes to increase initial listing standards and accelerate the
delisting of non-compliant companies, are sufficient to address
commenters' concerns related to companies in other jurisdictions.\103\
The Exchange also states that recently-adopted Nasdaq Rule IM-5101-3
provides Nasdaq with greater ability to deny listing to a company from
another jurisdiction based on, among other things, considerations
related to the company's advisors or concerns Nasdaq has identified
with other similarly-situated companies.\104\ The Exchange states that
Nasdaq Rule IM-5101-3 also provides a qualitative description of
factors related to Nasdaq's use of discretion in denying an initial
listing, including where a company is located and whether the company
is in a jurisdiction where there are limited legal remedies available
to U.S. investors.\105\ The Exchange believes that Nasdaq Rule IM-5101-
3 helps to address commenters' desires to extend the proposal to other
jurisdictions.\106\ Furthermore, the Exchange states that it will
continue to monitor and will increase listing standards for companies
from additional countries, as necessary.\107\
---------------------------------------------------------------------------

\103\ See Amendment No. 3, supra note 9, at 22.
\104\ See id. at 22.
\105\ See id. at 23.
\106\ See id.
\107\ See id.
---------------------------------------------------------------------------

Despite the suggestions by commenters to apply heightened listing
standards to companies from other jurisdictions, the Commission must
approve the proposal if it finds that the proposal is consistent with
the Act and rules thereunder.\108\ The Exchange may exercise its
discretion, through application of Nasdaq Rule 5101 and Nasdaq Rule IM-
5101-3, to deny initial listing to a company based on factors that make
a company's securities susceptible to manipulation, including where the
company is located (with such location not being limited to China) and
whether the expected public float and dissemination of the share
distribution raises concerns about adequate liquidity and potential
concentration. While the Exchange's general discretionary authority
thus allows for heightened scrutiny of a company from another foreign
jurisdiction if the Exchange identifies an elevated level of fraud
involving companies in that jurisdiction, the unique and persistent
risks presented by China-based companies, as discussed above, justify
the articulation of clear heightened listing standards for China-based
companies as reasonably designed means to address those risks. As such,
the Commission finds that the proposal is not unfairly discriminatory
and is designed to prevent fraudulent and manipulative acts, consistent
with Section 6(b)(5) of the Act, and will not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act, consistent with Section 6(b)(8) of the Act.
---------------------------------------------------------------------------

\108\ 15 U.S.C. 78s(b)(2)(C)(i).
---------------------------------------------------------------------------

Identification of China-Based Companies
The Exchange proposes to apply heightened initial listing standards
to China-based companies that are headquartered or incorporated in
China (including Hong Kong and Macau), or whose business is principally
administered in one of these jurisdictions. Proposed Nasdaq Rule
5210(l) provides that the Exchange will determine in which jurisdiction
a company is principally administered based on an analysis of the facts
and circumstances, including seven enumerated elements.\109\
---------------------------------------------------------------------------

\109\ See Amendment No. 3, supra note 9, at 10.
---------------------------------------------------------------------------

The Exchange states that it will consider these elements
holistically.\110\ Several of these elements are already used to
determine whether a company's business is principally administered in a
Restrictive Market under Nasdaq Rule 5005(a)(37).\111\ The Exchange
states that it is proposing to broaden its criteria from the current
criteria under Nasdaq Rule 5005(a)(37) and that the additional

[[Page 29194]]

elements are supported by Nasdaq's experience in applying the
Restrictive Market definition and Commission staff guidance regarding
foreign private issuers.\112\ According to the Exchange, the use of the
factors for determining whether a company is based in China will assist
Nasdaq in determining which companies should be subject to the proposed
new standard, which will prevent fraudulent and manipulative acts and
practices.\113\ The Exchange also states that it believes that the
factors are not unfairly discriminatory.\114\ The Exchange states that
if it determines that a company is a China-based company and denies
such company's listing application for failure to satisfy the proposed
heightened initial listing standards, the company could appeal Nasdaq's
determination pursuant to the Nasdaq Rule 5800 Series.\115\
---------------------------------------------------------------------------

\110\ See id. at 12.
\111\ See id. at 11, n.26. See also Nasdaq Rule 5005(a)(37).
\112\ See Amendment No. 3, supra note 9, at 11, n.26.
\113\ See Amendment No. 3, supra note 9, at 26.
\114\ See id.
\115\ See id. at 12.
---------------------------------------------------------------------------

One commenter generally supported the proposal, but expressed
concern that the proposed scope of issuers that would be considered to
be China-based companies ``could capture issuers that are incorporated,
headquartered, and operating entirely in the United States, or in other
transparent jurisdictions, merely because (i) they were founded or
controlled by entrepreneurs who are Chinese citizens or (ii) 50% of
their officers or directors are Chinese citizens, even if such
individuals have long resided in the United States.'' \116\ This
commenter stated that the current proposal ``risks unintentionally
capturing issuers that do not present the same regulatory concerns'' as
the concerns that the proposal was designed to address and suggested
that the heightened requirements in the proposal only apply to issuers
``principally operating in China, rather than issuers that are based in
the U.S. simply because their founders, controlling persons, directors,
or officers are Chinese citizens.'' \117\
---------------------------------------------------------------------------

\116\ HTFL Letter at 2.
\117\ Id. This commenter stated that the proposed listing
standard should be based on ``operational jurisdiction and
regulatory overnight, not citizenship per se'' so as not to create
``unintended barriers for legitimate issuers operating under robust
local regulations.'' Id. (emphasis omitted). See also US Unicorn
Letter at 1. Another commenter stated that the criteria ``risks
capturing companies that are headquartered, incorporated, and
operating entirely within the United States or other transparent
jurisdictions,'' and the proposal ``conflates citizenship with
regulatory risk.'' See US Unicorn Letter at 1.
---------------------------------------------------------------------------

In response, the Exchange states that the location and citizenship
of a company's founders and leadership is an important factor in
determining where a company conducts its principal business
activities.\118\ The Exchange also explains that location and
citizenship of such persons will be considered in the context of other
elements in making its determination, and the presence of one element
would not necessarily result in a determination that the issuer is
China-based.\119\
---------------------------------------------------------------------------

\118\ See Amendment No. 3, supra note 9, at 21-22.
\119\ See id. at 22.
---------------------------------------------------------------------------

The Exchange's consideration of where a company is principally
administered is reasonably designed to prevent companies from evading
heightened initial listing standards imposed on China-based companies
by moving the location of their headquarters or jurisdiction in which
they are incorporated and avoids differential treatment of companies
that present similar risks. The specific elements that will be used to
determine whether an issuer has a business that is principally
administered in China are substantially similar to the elements in
Nasdaq's rules that are used to determine whether a business is
principally administered in a Restrictive Market, with additional
elements that the Exchange states that it added based on its experience
applying the Restrictive Market definition.\120\ The application of
these elements in a holistic manner, rather than an automatic
classification of a company based on a single element, will allow the
Exchange to use its judgment to determine whether or not a particular
company's ties with China are significant enough to indicate that the
company principally administers its business in China. Accordingly, the
specific elements proposed by the Exchange for determining whether an
issuer has a business that is principally administered in China and
thus will be considered a China-based company, which the Exchange will
consider holistically based on the facts and circumstances, should help
to ensure that the Exchange applies the heightened initial listing
standards to companies in a manner that is not unfairly discriminatory,
consistent with Section 6(b)(5) of the Act, and will not impose any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, consistent with Section 6(b)(8)
of the Act.
---------------------------------------------------------------------------

\120\ See id. at 5 (citing to Securities Exchange Act Release
No. 93256 (Oct. 4, 2021), 86 FR 56338 (Oct. 8, 2021) (SR-NASDAQ-
2021-007)).
---------------------------------------------------------------------------

Heightened Initial Listing Standards for IPOs, Business Combinations,
and Transfers
The Exchange proposes heightened initial listing standards that
require (i) a China-based company conducting an IPO to offer a minimum
amount of securities in the U.S. to Public Holders in a Firm Commitment
Offering that will result in gross proceeds to the company of at least
$25 million; (ii) a company conducting a business combination, as
described in Nasdaq Rules 5110(a) or IM-5101-2, with a China-based
company, to have a minimum Market Value of Unrestricted Publicly Held
Shares following the business combination equal to at least $25
million; and (iii) a China-based company whose security is trading on
the OTC market or that is transferring its listing from another
national securities exchange to have a minimum Market Value of
Unrestricted Publicly Held Shares of at least $25 million and have
traded on the other market for at least one year before it is eligible
to list on Nasdaq.
The Exchange states that it has observed that China-based companies
listing on Nasdaq in connection with an IPO that had an offering size
below $25 million have a higher rate of compliance concerns.\121\
According to the Exchange, companies with a Firm Commitment Offering
size or Market Value of Unrestricted Publicly Held Shares below $25
million may not develop a sufficient investor base and trading interest
to provide the depth and liquidity necessary to promote fair and
orderly trading, resulting in an illiquid security and amplifying the
unique risks to U.S. investors presented by China-based issuers.\122\
The Exchange states that less liquid securities may also be more
susceptible to price manipulation, which is a particular concern when
insiders retain significant ownership interest in the company.\123\ The
Exchange states that requiring heightened initial listing standards
would mitigate the non-compliance concerns by ensuring that price
discovery would be supported by sufficient liquidity, U.S. investor

[[Page 29195]]

interest, and distribution to support fair and orderly trading.\124\
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\121\ See Amendment No. 3, supra note 9, at 13. Specifically,
the Exchange states that its analysis of IPOs from April 2022 to
April 2025 found that of the 151 companies headquartered or
incorporated in China that listed on Nasdaq through an IPO, 143 of
such companies had offering amounts of less than $25 million, and
nearly half of those 143 companies were cited for failure to comply
with Nasdaq's continued listing standards. See id. at 14.
\122\ See id. at 13-14.
\123\ See id. at 28.
\124\ See id. at 14.
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In particular, the Exchange's proposal to heighten the requirement
for a China-based company listing in connection with an IPO such that
the company would be required to offer a minimum amount of securities
in a Firm Commitment Offering in the United States to Public Holders
that will result in gross proceeds to the company of at least $25
million is higher than the minimum Market Value of Unrestricted
Publicly Held Shares of $15 million from offering proceeds generally
required for a company seeking to list through an IPO on the NCM.\125\
The Exchange states that a Firm Commitment Offering typically involves
a book building process that helps to generate an investor base and
trading interest that promotes sufficient depth and liquidity to help
support fair and orderly trading on the Exchange.\126\ The Exchange
also states that these offerings typically involve significant due
diligence by third parties that are subject to U.S. regulatory
oversight.\127\ The Exchange states that the proposals to heighten the
initial listing standards for a company conducting a business
combination with a China-based company and a China-based company whose
security is trading on the OTC market or that is transferring its
listing from another national securities exchange will impose
comparable standards and help prevent China-based companies from using
a business combination or a transfer to avoid heightened listing
standards.\128\ A China-based company subject to the proposed initial
listing standards for an IPO, business combination, or transfer would
also need to comply with all other applicable listing standards for the
market tier on which it is listing.\129\
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\125\ See id. at 12-13. See also Nasdaq Rules 5505(b)(1)(B),
5505(b)(2)(C), and 5505(b)(3)(C). The initial listing standards for
a company listing in connection with an IPO that principally
administers its business in a Restrictive Market include a similar
$25 million threshold. See id. at 13. However, no China-based
jurisdiction has fallen within the Restrictive Market definition
since December 2022, when the PCAOB secured access to inspect and
investigate audit firms in the PRC. See id. at 5. See also <a href="https://assets.pcaobus.org/pcaob-dev/docs/default-source/international/documents/2022-hfcaa-determination-report.pdf?sfvrsn=1345a530_4">https://assets.pcaobus.org/pcaob-dev/docs/default-source/international/documents/2022-hfcaa-determination-report.pdf?sfvrsn=1345a530_4</a>.
\126\ See Amendment No. 3, supra note 9, at 13.
\127\ See id. at 13-14.
\128\ See id. at 18-19.
\129\ See id. at 13.
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One commenter stated that most emerging growth, China-based
companies raised funds in the range of $5 million to $15 million, ``an
amount generally sufficient to support phased objectives such as
technology research and development and market expansion.'' \130\ This
commenter stated that increasing the minimum IPO threshold to $25
million, as proposed, ``would exclude approximately 88% of potential
listing candidates based solely on the offering size requirement.''
\131\ Another commenter stated that the proposed $25 million minimum
proceeds requirement ``lacks adequate empirical support and
rationale.'' \132\ Several commenters stated that the proposal limits
the investment opportunities for U.S. investors and their ability to
make their own investment decisions.\133\
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\130\ SEN Time Studio Letter at 3. See also Cecilia Letter at 1.
\131\ SEN Time Studio Letter at 3. One commenter stated that
``genuine high-growth companies . . . will be forced to pivot to
other capital markets.'' US Unicorn Letter at 2. See also HIGO
Letter at 1; SEN Time Studio Letter at 3; USA World Letter at 3.
\132\ See USA World Letter at 2-3. This commenter stated that
there is no ``transparent empirical analysis'' to support the
proposed $25 million standard and that a ``minimum fundraising
amount does not necessarily translate into increased liquidity or
improved trading conditions.'' Id. at 2.
\133\ See US Unicorn Letter at 2; USA World Letter at 3;
Bevilacqua Letter 1 at 3.
---------------------------------------------------------------------------

The Commission has previously stated that a Firm Commitment
Offering is designed to promote appropriate price discovery and assists
in creating a liquid market.\134\ In addition, having a minimum Market
Value of Unrestricted Publicly Held Shares, and minimum duration, where
applicable, should allow the Exchange to more accurately determine
whether a China-based company conducting an IPO, a post-business
combination entity involving a China-based company, or a China-based
company seeking to transfer from a different market has a sufficient
market, adequate distribution, liquidity, and investor interest, and is
thus suitable for listing and trading on the Exchange. Further, the
Exchange provided information showing that nearly half of the China-
based companies that listed on Nasdaq through an IPO from April 2022 to
August 2025 were subsequently cited for failure to comply with
continued listing standards.\135\ This information supports concerns
about the rate of non-compliance exhibited by China-based companies
with offering proceeds below $25 million. Accordingly, the proposed $25
million threshold is reasonably designed to exclude from listing
companies that are more likely to experience issues complying with the
Exchange's continued listing standards. The proposal is appropriately
targeted to the unique risks that may be posed by China-based companies
and, within that subset of companies, those that may not develop a
sufficient investor base and trading interest to provide the depth and
liquidity necessary to promote fair and orderly markets and reduce the
risk of manipulative trading. Therefore, the Commission finds that the
heightened initial listing standards for China-based companies are
reasonably designed and consistent with the requirements of Section
6(b)(5) of the Act that the rules of the Exchange be designed to
prevent fraudulent and manipulative acts and practices, promote just
and equitable principles of trade, and protect investors and the public
interest, and not be designed to permit unfair discrimination.
---------------------------------------------------------------------------

\134\ See Securities Exchange Act Release No. 93256 (Oct. 4,
2021), 86 FR 56338, 56343 (Oct. 8, 2021) (SR-NASDAQ-2021-007). See
also Securities Exchange Act Release No. 86314 (July 5, 2019), 84 FR
33102, 33112 (July 11, 2019) (SR-NASDAQ-2019-009).
\135\ See supra note 121.
---------------------------------------------------------------------------

The Commission also finds that the proposal is consistent with
Section 6(b)(8) of the Act in that it does not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act.\136\ The Commission recognizes that imposing
heightened listing standards on China-based companies will result in a
segment of smaller, China-based companies not qualifying for initial
listing that would have otherwise satisfied the Exchange's initial
listing standards. As such, the heightened listing standards may hamper
the ability of these companies to attract investors and raise capital.
However, as discussed above, the risks to U.S. investors posed by
China-based companies justify imposing heightened initial listing
standards and the $25 million threshold is reasonably designed to
promote fair and orderly markets and reduce the risk of manipulative
trading. Therefore, the proposal does not impose any burden on
competition that is not necessary or appropriate in furtherance of the
Act.
---------------------------------------------------------------------------

\136\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

Several commenters stated that Nasdaq's current rules already
provide the Exchange with discretionary authority to address its
concerns regarding liquidity and potential manipulation of China-based
companies.\137\ The commenters cited Nasdaq Rule 5101 in relation to
Exchange's discretionary authority,\138\

[[Page 29196]]

Nasdaq Rule 5210(k) in relation to heightened initial listing standards
for Restrictive Market companies,\139\ and Nasdaq Rules
5810(c)(3)(A)(iii) and 5815(a)(1)(B)(ii) in relation to immediate
delisting and suspension from trading if a company's security closes at
or below $0.10 for ten consecutive business days.\140\
---------------------------------------------------------------------------

\137\ See US Unicorn Letter at 1-2; SEN Time Studio Letter at 2-
3; United Securities Letter at 2-3; Cecilia Letter at 1; HKUBC
Letter at 1-2.
\138\ See US Unicorn Letter at 1-2. See also SEN Time Studio
Letter at 2; HKUBC Letter at 1-2. One commenter stated that Nasdaq
is ``well-positioned'' to achieve the proposals' objective through
Nasdaq Rule IM-5101-3. See HKUBC Letter at 2-3.
\139\ See US Unicorn Letter at 1-2. Another commenter stated
that audit and enforcement concerns have been ``substantially
mitigated by the 2022 U.S.-China agreement granting inspection
access and ongoing cooperation.'' United Securities Letter at 3. See
also Cecilia Letter at 1.
\140\ See SEN Time Studio Letter at 3. One commenter stated that
the proposed rules would compound the effect of delisting rules on
China-based companies. See Cecilia Letter at 1-2.
---------------------------------------------------------------------------

The Exchange states that the proposal seeks to address areas of
concern that may not be adequately addressed by the existing Nasdaq
rules.\141\ In response to commenters, the Exchange states that, unlike
Nasdaq Rule IM-5101-3, the proposed rule contains a minimum threshold
of $25 million that is reasonable and necessary because imposing the
threshold may mitigate the higher rate of compliance concerns observed
in China-based companies below the $25 million threshold.\142\
---------------------------------------------------------------------------

\141\ See Amendment No. 3, supra note 9, at n.23. The Exchange
also states that current listing standards are sufficient to address
the commenters' concerns related to companies in other
jurisdictions. See id. at 22. See also supra notes 103-106 and
accompanying text.
\142\ See Amendment No. 3, supra note 9, at 23.
---------------------------------------------------------------------------

While existing Nasdaq initial and continued listing standards may
address some similar concerns, the risks identified by the Exchange
discussed above justify the imposition of requirements that
specifically target China-based companies with a smaller offering size
or public float. As compared to the Exchange's broad discretionary
authority under Nasdaq Rules 5101 and IM-5101-3, the imposition of a
$25 million threshold for China-based companies that seek to list on
the Exchange in connection with an IPO, in conjunction with a business
combination, or through a transfer from another market will provide
transparency regarding how the Exchange will make its listing
determinations regarding China-based companies and allow for the
listing of those China-based companies whose securities the Exchange
can reasonably expect to have sufficient depth and liquidity to promote
fair and orderly markets. Additionally, following changes that secured
access to inspect and investigate audit firms by PCAOB in the PRC in
December 2022, China (including Hong Kong and Macau) no longer
qualifies as a Restrictive Market and therefore China-based companies
are no longer subject to the heightened listing standards for
Restrictive Market companies under Nasdaq Rule 5210(k).\143\ Further,
recent changes to Nasdaq Rules 5810(c)(3)(A)(iii) and
5815(a)(1)(B)(ii), along with other recently adopted changes to the
Exchange's continued listing standards, address suspension and
delisting from the Exchange.\144\ In contrast, the current proposal is
reasonably designed to help prevent the initial listing of companies
that otherwise would be reasonably expected to have difficulties
maintaining compliance with the Exchange's continued listing standards,
thereby promoting fair and orderly markets and preventing potential
harm to investors.
---------------------------------------------------------------------------

\143\ See id. at 5.
\144\ See, e.g., Securities Exchange Act Release Nos. 101271
(Oct. 7, 2024), 89 FR 82652 (Oct. 11, 2024) (SR-NASDAQ-2024-029)
(modifying the application of bid price compliance periods where a
listed company takes action to achieve compliance with the minimum
bid price rule and that action causes non-compliance with another
continued listing requirement); 102245 (Jan. 17, 2025), 90 FR 8081
(Jan. 23, 2025) (SR-NASDAQ-2024-045) (modifying the application of
bid price compliance periods and the delisting appeals process for
non-compliance with the minimum bid price rule under certain
circumstances); 104318 (Dec. 5, 2025), 90 FR 57225 (Dec. 10, 2025)
(SR-NASDAQ-2025-065) (modifying the application of minimum bid price
rule in situations where a security does not maintain a closing bid
price of greater than $0.10 for ten consecutive business days).
---------------------------------------------------------------------------

Several commenters provided suggested alternatives to the proposal.
One commenter stated that a more effective strategy for addressing
market manipulation would be to expand cross-market trading
surveillance and enforcement tools.\145\ In addition, the commenter
suggested strengthening universal disclosure and corporate governance
requirements and adopting market-wide liquidity and quality
metrics.\146\ Another commenter recommended that the Exchange impose
industry-specific exemptions and publicly disclose the ``material
considerations . . . when rejecting listing applications,'' and improve
procedural protections.\147\ Another commenter suggested that the
Exchange and the Commission should conduct further dialogue with market
participants on the proposal.\148\ Even if commenters' suggestions
could provide an alternative means of addressing the risks presented by
China-based companies that are discussed above, these suggestions are
not part of Nasdaq's proposal and the Commission must approve the
proposal if it finds that the proposal is consistent with the Act and
rules thereunder. As discussed above, the proposed heightened initial
listing standards are reasonably designed to address these risks.
---------------------------------------------------------------------------

\145\ See USA World Letter at 4.
\146\ See id.
\147\ See SEN Time Studio Letter at 4. This commenter also
suggested that the Exchange allow certain companies to raise capital
through a combination of new share issuance and convertible debt
issuance. See id.
\148\ See China LCA Letter at 2.
---------------------------------------------------------------------------

Restricted Use of Direct Listings
Under the proposal, the Exchange will not permit China-based
companies to list on the NGM and NCM in connection with a Direct
Listing.\149\ The Exchange states that it does not believe the initial
listing standards for Direct Listings on the NGM and NCM, which require
a Market Value of Unrestricted Publicly Held Shares as low as $30
million, are sufficient for China-based companies to support meaningful
price discovery and fair and orderly trading because Direct Listings do
not raise any offering proceeds and typically do not involve an
underwriter to market the transaction and help develop investor
interest.\150\ The Exchange also states that adopting this additional
requirement will help prevent companies from using a Direct Listing to
avoid the proposed requirement for IPOs.\151\ China-based companies
will continue to be permitted to list on the NGS in connection with a
Direct Listing, provided they meet the applicable listing
standards.\152\
---------------------------------------------------------------------------

\149\ See proposed Nasdaq Rule 5210(l)(iii).
\150\ See Amendment No. 3, supra note 9, at 17-18.
\151\ See id. at 18.
\152\ See id. at 16. In contrast to the relatively low Market
Value of Publicly Held Shares requirements on the NGM and NCM, a
company seeking to list on the NGS in connection with a Direct
Listing must demonstrate a Market Value of Publicly Held Shares of
at least $250 million and a Market Value of Unrestricted Publicly
Held Shares of at least $100 million. See id. at 17.
---------------------------------------------------------------------------

Given the heightened risks identified by the Exchange regarding
China-based companies, the restriction on China-based companies listing
on the NCM or NGM in connection with a Direct Listing is reasonably
designed to ensure that these companies have adequate liquidity to
support fair and orderly trading and prevent China-based companies from
using Direct Listings to avoid the heightened initial listing
requirements for IPOs. Accordingly, the Commission finds that the
proposal to prohibit China-based companies from listing on the NGM and
NCM in connection with a Direct Listing is consistent with the
requirements of Section 6(b)(5) of the Act that the rules of the
exchange be designed to prevent fraudulent and manipulative acts and
practices, promote just and equitable

[[Page 29197]]

principles of trade, and protect investors and the public interest, and
not be designed to permit unfair discrimination, and the requirements
of Section 6(b)(8) of the Act that the rules of the exchange not impose
a burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
In sum, the Commission concludes that given the risks Nasdaq, along
with U.S. policymakers and regulatory agencies, have identified as
being presented by China-based companies, the proposed heightened
initial listing standards for China-based companies, including the
prohibition on Direct Listings on the NGM and NCM, would help ensure
that listed companies have a sufficient market, with adequate depth and
liquidity, and sufficient investor interest to support listing on the
Exchange. Accordingly, the proposal to impose these heightened listing
standards on China-based issuers will help maintain fair and orderly
markets and is designed to protect investors and the public interest,
and is not designed to permit unfair discrimination. Further, the
proposal does not impose a burden on competition that is not necessary
or appropriate in furtherance of the purposes of the Act because the
risks posed by China-based companies justify their differential
treatment and the heightened initial listing standards are reasonably
designed to protect investors and help maintain a fair and orderly
market.
Implementation Period
The Exchange has proposed a delay of 30 days after Commission
approval of the proposal before the changes become effective. The
Exchange states that this will allow companies that have taken
substantial steps to list under the current rules to complete the
initial listing process.\153\ Two commenters requested a longer
transition period.\154\ In response, the Exchange states that the
initial proposal was published in September 2025, and it has provided
issuers with pending listing applications with sufficient time to
prepare for heightened listing standards.\155\ The Commission finds
that the proposed implementation period is appropriate and consistent
with the requirements of the Act because a 30-day implementation period
should allow prospective issuers time to prepare while avoiding an
unnecessary delay in the Exchange implementing the proposed heightened
listing standards to address the risks it has identified pertaining to
China-based companies.
---------------------------------------------------------------------------

\153\ See id. at 19-20.
\154\ See HTFL Letter at 3 (recommending at 60-day period); SEN
Time Studio Letter at 4 (recommending a period of no less than 180
days for issuers already in the listing review or preparation
process). In addition, one commenter provided examples of pending
business combination listings of Special Purpose Acquisition
Companies (``SPACs'') with China-based companies and observed that
``they have been at a standstill since this new rule proposal.'' See
Letter from Anonymous, dated Apr. 23, 2026, at 1, 2-8. This
commenter stated that the proposal ``appears to retroactively alter
the regulatory landscape for any and all China-linked SPACs,'' and
suggested that the proposal ``should be implemented prospectively,
with sufficient transition periods and safeguards to protect
existing investors.'' Id. at 1, 10.
\155\ See Amendment No. 3, supra note 9, at 22.
---------------------------------------------------------------------------

Based on the foregoing, the Commission finds that the proposed rule
change, as modified by Amendment No. 3, is consistent with the Act.

V. Solicitation of Comments on Amendment No. 3 to the Proposed Rule
Change

Interested persons are invited to submit written data, views, and
arguments concerning whether the proposed rule change, as modified by
Amendment No. 3, is consistent with the Act. Comments may be submitted
by any of the following methods:

Electronic Comments

<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#d9abacb5bcf4bab6b4b4bcb7adaa99aabcbaf7beb6af"><span class="__cf_email__" data-cfemail="f785829b92da94989a9a92998384b7849294d9909881">[email&#160;protected]</span></a>. Please include
file number SR-NASDAQ-2025-069 on the subject line.

Paper Comments

<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-NASDAQ-2025-069. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). Copies of the filing will be available for inspection and
copying at the principal office of the Exchange. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection. All submissions
should refer to file number SR-NASDAQ-2025-069 and should be submitted
on or before June 9, 2026.

VI. Accelerated Approval of the Proposed Rule Change, as Modified by
Amendment No. 3

The Commission finds good cause to approve the proposed rule
change, as modified by Amendment No. 3, prior to the thirtieth day
after the date of publication of notice of the filing of Amendment No.
3 in the Federal Register. The change made to the proposal in Amendment
No. 3 to remove the ability of China-based companies listing in
connection with a Direct Listing to list on the NGM is consistent with
the proposal's aim to impose heightened listing standards on China-
based companies to help provide better liquidity in those securities,
and thus mitigate the unique risks that such companies may present.
This change to the proposal also will help to ensure that China-based
companies are not able to evade the heightened listing standards for
IPOs by listing in connection with a Direct Listing on the NGM and
ensures consistent treatment with Direct Listings seeking to list on
the NCM. In addition, as compared to the Notice, Amendment No. 3
provides additional clarity to the proposal by (1) making certain
clarifications to proposed Nasdaq Rule 5210(l)(iii) in relation to a
company seeking to list by Direct Listing, and proposed Nasdaq Rule
5210(l)(iv) in relation to a company whose security is trading on the
OTC market or that is transferring its listing from another national
securities exchange; (2) providing additional explanation of certain
aspects of the proposal; (3) providing responses to comment letters;
and (4) making other technical and non-substantive changes.
These changes to the proposal and additional information in
Amendment No. 3 assist the Commission in evaluating the proposal and
determining that it is consistent with the Act, and do not raise any
regulatory issues substantially different from those that had
previously been subject to comment. Accordingly, the Commission finds
good cause, pursuant to Section 19(b)(2) of the Act,\156\ to approve
the proposed rule change, as modified by Amendment No. 3, on an
accelerated basis.
---------------------------------------------------------------------------

\156\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

VII. Conclusion

It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\157\ that the proposed rule change (SR-NASDAQ-2025-069), as
modified by Amendment No. 3 be, and hereby is, approved on an
accelerated basis.
---------------------------------------------------------------------------

\157\ Id.

[[Page 29198]]

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For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\158\
---------------------------------------------------------------------------

\158\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2026-09966 Filed 5-18-26; 8:45 am]
BILLING CODE 8011-01-P

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