This article first appeared on GuruFocus.
Nasdaq (NDAQ, Financials) is tightening its listing rules after years of eye-popping rallies and crashes in little-known stocks, many tied to small Chinese companies.
The exchange now wants firms operating in China to raise at least $25 million when they go public, and new listings under its income standard will need at least $15 million in public float, up from $5 million. Companies valued under $5 million could also face quicker suspensions and delistings.
The changes are designed to curb the kind of trading frenzies that saw some newly listed Chinese stocks surge more than 2,000% on day one before collapsing just as fast. Nasdaq says the goal is simple: give investors more protection and improve liquidity.
The proposal is now with the SEC, and if approved, Nasdaq plans to roll it out quickly. The timing is notable more than 100 Chinese firms already trade in the U.S., and the IPO market is heating up again heading into year-end. Tea chain Chagee, for example, pulled off one of the biggest Chinese listings this year with a $411 million raise on Nasdaq in April.