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NASDAQ's BX Venture Market - A New Listing Option For Smaller Companies

Herbert F. Kozlov and Jason M. Barr of Reed Smith


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The NASDAQ OMX Group received approval in May 2011 from the SEC to launch its new listing market, the BX Venture Market. The BX Venture Market is intended to serve as a new listing option for early-stage and smaller companies that do not qualify for listing on national securities exchanges. The objective of the BX Venture Market is to provide a more regulated and more transparent marketplace than those available in the over-the-counter markets.

NASDAQ expects to begin accepting listing applications later in 2011 and to launch the new market in 2012. Companies will be able to list common and preferred stock, ordinary shares and ADRs, trust and limited partnership interests, units, rights and warrants.

Potential companies for listing on this new market include those currently trading on an over-the-counter market (such as the OTC Bulletin Board or the OTC Pink Sheets), companies that have been or will be delisted by another market for failure to meet that market's listing standards, and smaller, less-traded companies seeking to increase liquidity.

The BX Venture Market features less rigorous quantitative listing requirements, but generally similar qualitative listing requirements as those of national securities exchanges.

Qualitative Requirements

Companies must meet the following qualitative listing requirements, among others, related to corporate governance to list on the BX Venture Market:

  • The listed security must be registered under Section 12(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the company must be current in its periodic filings with the SEC 
  • Listed securities must be eligible for a Direct Registration program operated by a clearing agency registered under Section 17A of the Exchange Act for the prompt, accurate settlement of securities transactions
  • The company must hold annual stockholder meetings and must solicit proxies
  • The company must obtain stockholder approval for equity compensation arrangements, and the company's independent directors must make or recommend compensation decisions for executive officers
  • The company must have a fully independent audit committee comprised of at least three independent directors
  • The company must have a code of conduct applicable to all directors, officers, and employees, and all related party transactions must be reviewed by independent directors 

Significantly, BX Venture Market-listed companies will not be required to have a majority independent board or an independent nominating committee, and companies will be permitted to phase in compliance with independent director requirements. In addition, BX Venture Market-listed companies are not subject to the "20% Rule," which requires companies to obtain stockholder approval for certain private placement issuances at less than market value.

Quantitative Requirements

Companies that list on the BX Venture Market must meet the following financial standards, which are set lower than the requirements of other national securities exchanges:

  • Two market makers
  • 200,000 publicly held shares
  • 200 public stockholders, at least 100 of which must be round-lot holders for initial listing, and 200 public stockholders for continued listing
  • A market value of listed securities of at least $2 million for initial listing and $1 million for continued listing
  • For initial listing, a minimum initial price of $0.25 per share for securities previously listed on a national securities exchange and $1.00 per share for securities not previously listed on a national securities exchange
  • For continued listing, securities will be required to maintain a minimum $0.25 per share bid price; if the security does not maintain a minimum $0.25 per share bid price for 20 consecutive trading days, the company would be subject to delisting

In addition, a company not previously listed must have at least a one-year operating history, and a minimum of either $1 million in shareholders' equity or $5 million in total assets, and must demonstrate that it has sufficient working capital for its business for at least 12 months after the first day of listing.

Securities listed on the BX Venture Market are considered "penny stocks" and therefore will be subject to the SEC penny stock rules. In addition, unlike securities on other national securities exchanges, it should be noted that securities listed on the BX Venture Market are not exempt from state blue sky rules. Accordingly, such securities must be registered with state rules governing the sale and offering of securities. BX Venture Market-listed companies will be prohibited from representing that they are listed on a NASDAQ market and will be subject to delisting for violating this prohibition.


Herbert F. Kozlov, Partner, hkozlov@reedsmith.com

Herb has been engaged in the practice of law since 1977. His practice focuses upon corporate law, including public and private mergers, acquisitions and divestitures; private equity transactions; capital markets transactions; venture capital transactions; partnership matters; cross-border transactions; corporate governance matters; and representation of private and publicly owned companies.

Herb serves as outside general counsel for public and private companies and provides advice on a broad range of legal issues. He has served as a director of various companies. He has played an active role in advising companies in diverse fields, including information sciences; real estate finance; software; communications; biomedical, nutrition and health care; chemical and plastics; advertising, marketing and promotions; and media and entertainment.

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Jason M. Barr, Senior Associate, jbarr@reedsmith.com

Jason is an associate in the Corporate and Securities Group. His recent work includes U.S. registered public offerings and private placements of debt and equity securities and preparing SEC reporting documents, including periodic reports for reporting companies and beneficial ownership reports for shareholders and insiders of public companies. Jason regularly represents both issuers and investors in private placements, including PIPE offerings, and in registered direct shelf offerings of public companies. His practice includes advising on resales of restricted securities under Rule 144, counseling boards on corporate governance matters, advising issuers on corporate finance, and drafting a variety of agreements dealing with general corporate/business and securities law matters, including operating agreements of limited liability companies. Jason works with a plethora of clients, both emerging companies and more seasoned issuers, from diverse fields, notably life sciences and medical, real estate finance, communications, and technology.

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Reed Smith

Reed Smith is a global relationship law firm with more than 1,600 lawyers in 23 offices throughout the United States, Europe, Asia and the Middle East. Founded in 1877, the firm represents leading international businesses, from Fortune 100 corporations to mid-market and emerging enterprises. Its lawyers provide litigation and other dispute resolution services in multi-jurisdictional and other high-stakes matters; deliver regulatory counsel; and execute the full range of strategic domestic and cross-border transactions. Reed Smith is a preeminent advisor to industries including financial services, life sciences, health care, energy and natural resources, advertising, technology and media, shipping, real estate, manufacturing, and education. For more information, visit reedsmith.com

Material in this work is for general educational purposes only, and should not be construed as legal advice or legal opinion on any specific facts or circumstances.  For legal advice, please consult your personal lawyer or other appropriate professional. Reproduced with permission from Reed Smith. This work reflects the law at the time of writing September 2011.