Nasdaq introduces an auction model to support less liquid shares on Nasdaq First North Growth Market

Published

Stockholm, March 29, 2023 – Nasdaq (Nasdaq: NDAQ) today, announces a new auction model targeting illiquid shares on Nasdaq First North Growth Market to further enhance market integrity and investor protection effective January 2024.

For more than 15 years, Nasdaq First North Growth Market has served as an important growth platform, enabling Nordic and international entrepreneurs to access growth capital to develop and expand their businesses. The liquidity on Nasdaq’s Nordic markets as a whole has improved over the years. However, in parallel shares of some companies have had challenges with liquidity. When the spreads become too wide, relatively small orders can create dramatic price movements. The volatility in these shares can be particularly harmful to retail investors and dampen overall confidence in market integrity.

The new model is the result of months of discussions and market analysis together with industry participants and will change how illiquid shares are traded to enhance market integrity and investor protection. Companies with more than seven percent average spread for two consecutive quarters will be presented with two options. The first option is to hire a liquidity provider and the second option is to offer trading through an auction model with five auctions per day: opening auction, 11.00, 13.00, 15.00 and closing auction. Initially, it will be implemented for Nasdaq First North Growth Market Sweden and Finland. Due to technical limitations the auction model will be postponed for Nasdaq First North Growth Market Denmark.

- Having a liquidity provider is an investment that is beneficial for both investors and the company. Investors are protected from high spreads making it easier to enter and exit positions and reduces the risk and cost of trade. In our research, we also see that the stock price response on average is positive and the fact that improved liquidity also improves possibilities to access new capital, says Nikolaj Kosakewitsch, Head of European Equities & Derivatives at Nasdaq

First North Growth Market Rulebook for Issuers of Shares will be updated during the annual change on July 1, 2023 and additional information on the new auction segment will be set out in the Nasdaq Nordic INET Market Model effective July 3, 2023. To ensure that stakeholders which are impacted by the change have sufficient time to adapt, the new rules will be effective when data from Q3 and Q4 has been analyzed and trading in the new auction segment will start on January 18, 2024.

- Nasdaq is committed to ongoing dialogues to support our issuers throughout the process. In addition to actively addressing the unique challenges and concerns faced by small growth companies today, we will continue to review and assess their trading experience with the new trading model once it’s implemented. We are hopeful that the new trading model will improve price formation and trading experience of the less liquid shares, as well as further enhance quality and integrity of our markets, says Adam Kostyál Head of European Listings at Nasdaq

Based on data we analyzed in 3rd quarter and 4th quarter of 2022, 28 firms listed on Nasdaq First North Growth Market Sweden are affected by the changes. This is subject to change as Q3 and Q4 data from 2023 will determine which companies that are affected by the change. Due to technical limitations among some Danish trading members the auction model will be postponed for Nasdaq First North Growth Market Denmark and initially be implemented only for Nasdaq First North Growth Market Sweden and Finland. We will continue the dialogue with Danish members to determine when and how they will be able to offer auction trading.

About Nasdaq

Nasdaq (Nasdaq: NDAQ) is a global technology company serving the capital markets and other industries. Our diverse offering of data, analytics, software and services enables clients to optimize and execute their business vision with confidence. To learn more about the company, technology solutions and career opportunities, visit us on LinkedIn, on Twitter @Nasdaq, or at www.nasdaq.com.

Nasdaq Media Contact

Erik Gruvfors +46 73 449 78 12 erik.gruvfors@nasdaq.com