Nasdaq rules undergo major overhaul! The proposal for large companies to "enter the market quickly within 15 days" has been approved, with new regulations effective from May 1.

The Nasdaq announced a comprehensive overhaul of the access rules for its flagship stock index, the Nasdaq 100. The key move is the introduction of a “fast entry” mechanism, which significantly shortens the waiting time for large newly listed companies to be added to the index. The new rules will take effect on May 1, but their actual impact on index constituent stocks is expected to become apparent only in June.

According to a report by Reuters, under the new rules, Nasdaq will assess a newly listed stock’s market-cap ranking on its seventh trading day. If it meets the criteria, it can be added to the Nasdaq 100 at the earliest on its 15th trading day. Previously, newly listed companies often had to wait as long as a year or even longer before becoming eligible for index inclusion review.

The significance of this change for the market should not be underestimated. Being included in the Nasdaq 100 index means being able to directly tap the capital of a large number of institutional investors that track the index, which can help broaden the company’s shareholder base and improve stock liquidity.

High-valuation unicorn companies such as SpaceX are preparing to go public, and this rules revision is seen as a proactive move by the exchange to welcome a potential wave of IPOs.

“Fast Entry”: Complete evaluation in as few as 15 days

The specific process under the new fast entry mechanism is as follows: Nasdaq will rank a newly listed stock by market value on its seventh trading day after listing, and assess whether it can make it into the top 40 constituents by market cap. If the company meets all the eligibility requirements, it will be formally included in the Nasdaq 100 after the 15th trading day.

By contrast, under the current rules, constituent rankings are reviewed only once per year. Newly listed companies must demonstrate that they have the stability to absorb large buy orders from institutional investors; the entire process can take up to a year or more.

Reuters reported earlier this month that SpaceX is actively seeking to be added to major benchmark indices such as the Nasdaq 100 as soon as possible after listing.

In addition, other index operators—including FTSE Russell and the NYSE 100—are also racing to roll out similar reforms to the access rules in order to address the challenges posed by highly prominent companies such as SpaceX, Anthropic, and OpenAI that are about to enter the capital markets.

The rules revision covers multiple supporting adjustments

Besides the fast entry provisions, this new rule set also includes a number of systemic revisions:

Updated market-cap calculation method. The new approach will combine already listed shares and unlisted shares across different share classes to calculate market capitalization, in order to more comprehensively assess a company’s market value and determine whether it qualifies for inclusion.

Removal of the minimum free-float ratio requirement. The existing requirement that companies hold at least 10% of shares available for trading will be eliminated. However, companies with a lower free-float ratio will receive a correspondingly reduced weight in the index to balance the impact.

Establishment of a weight-floor exit mechanism. If a constituent stock’s weight in the index remains below 10 basis points for two consecutive months, it will be removed from the index, to be replaced by the next eligible company with the largest market cap.

Quarterly updates to total shares outstanding data. The frequency at which companies update their total free-floating share counts will change from the current ad hoc updates to regular disclosures on a quarterly basis.

Current members of the Nasdaq 100 index include global tech leaders such as Nvidia, Apple, and Amazon. Last year, Walmart moved its listing location to Nasdaq, setting the record for the largest-ever exchange transfer of listings.

The number of listed companies keeps shrinking

The backdrop for this reform is a long-term decline in the attractiveness of U.S. public markets. According to a white paper published by Nasdaq last year, since 2000, the number of companies listed on U.S. exchanges has fallen by more than one-third.

Burdened disclosure requirements and high listing compliance costs have led more and more large startups to choose to delay going public or remain private for the long term. High-valuation companies such as Stripe and Databricks have not yet listed on public markets.

Cameron Lilja, head of Nasdaq Global Index Solutions, said that keeping a company that has already reached a substantial scale—large enough to occupy a meaningful weight in an index—“does not truly reflect the market’s actual composition.”

He also noted that as corporate equity structures become increasingly diversified, more and more companies have grown into true mega-cap companies even before going public.

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