Nasdaq’s Proposal to Improve the Trading Environment in Small and Medium Growth Companies and Investors
Randall Hopkins, Nasdaq VP and Head of Capital Markets Reform & Innovation (right) speaks to Wall Street Journal reporter Maureen Farrell and John Backus, Co-founder & Managing Partner, PROOF at the Financing the Future of American Business event. The summit took place at the U.S Chamber of Commerce on April 26, 2018.
Since we launched our Revitalize initiative, Nasdaq has continued to advocate for reforms that can help reignite America’s economic engine by modernizing market structure, reconstructing the regulatory framework and reorienting to a long-term view. Among our recent efforts, we have developed detailed recommendations for providing a better trading environment for small and medium growth companies and investors.
Our one-size-fits-all equity market structure can exacerbate problems of liquidity and volatility. Issuers should have more choice in how their stocks trade in today’s fragmented and complex trading environment. Reversing this trend for less liquid securities and consolidating displayed liquidity onto a single trading venue can help smaller companies. Nasdaq was pleased to participate in a number of activities recently as part of this effort.
In support of consolidating liquidity, we testified before Congress and presented this issue to the U.S. Treasury during their deliberation on their October 2017 report on reforming the capital markets, which ultimately included this recommendation. Further supporting our efforts, Congress is working on legislation aimed at the challenges smaller companies face with fragmented liquidity.
Nasdaq senior executives joined the SEC and financial industry leaders on April 23 for a roundtable on market structure for thinly-traded securities. Several Nasdaq executives advocated for issuer choices in market structure on panels throughout the day. The discussions sparked much debate on the scope of the issue and possible solutions. Following the roundtables, Nasdaq finalized an application for action and submitted it formally to the SEC. The application advocates for issuers up to $700 Million in market capitalization to be able to choose to consolidate liquidity on their listing exchange to relieve their stock from fragmented trading.
Nasdaq remains committed to advocating for change in this area on behalf of publicly-traded companies and investors. Last week Nasdaq and a coalition released a report, “Expanding the IPO On-Ramp: Recommendations to Help More Companies Go and Stay Public”. The coalition behind the report includes the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness (CCMC), BIO, NVCA, TechNet and SIFMA.
The report outlines 22 policy recommendations around governance, research, proxy advisory firms, and short sale disclosure, among other dimensions. The recommendations target economic growth and job creation by helping more companies go and stay public. The report was released alongside CCMC’s 12th Annual Capital Markets Summit, Financing the Future of American Business.
Watch the video below as members of the coalition discuss the effort to reinvigorate IPOs in the US.
- Ending the One Size Fits All Market: Let's Give Issuers Flexibility
- A More Concentrated Market Would Help IPOs
- Nasdaq Testifies on U.S. Equity Market Structure
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.