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Frequently Asked Questions
  What actions may Nasdaq take where there are indications that there is insufficient liquidity in a security to support fair and orderly trading?
Identification Number 1742
Nasdaq rules are designed to maintain a fair and orderly market in listed securities.  While each case is analyzed based on unique facts and circumstances, Nasdaq may determine to halt trading in a security when it observes unusual trading characteristics that could be caused by insufficient liquidity.  Such a trading halt will allow Nasdaq to request information from the company about the number of unrestricted publicly held shares. Nasdaq may also request such information when a company announces a corporate action that would result in a contraction in the number of unrestricted publicly held shares, such as a reverse stock split, tender offer, stock buyback, or entering into a contractual agreement such as a standstill or lockup.
 
Upon receipt of information about the company’s unrestricted publicly held shares, Nasdaq will consider if the number is sufficient to support liquid trading in the security.  Generally, where a company has a number of unrestricted publicly held shares that is at least as high as the applicable publicly held shares requirement for continued listing of the security, Nasdaq would consider there to be a sufficient number to support liquid trading.  However, where the number is lower, or if other factors exist such as an unusually high volume of trading, Nasdaq may use its discretionary authority under Rule 5101 to apply more stringent criteria. In such case, Nasdaq may require the company to provide a plan to increase the number of unrestricted publicly held shares.
 
Where Nasdaq has halted trading, Nasdaq generally will only resume trading after determining that there are sufficient shares available to facilitate proper price discovery in the secondary market, thereby protecting investors and the public interest.
Publication Date*: 7/14/2020 Mailto Link Identification Number: 1742
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