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Nasdaq News: New BX Venture Market Approved

Well, OK. We've just learned that last Friday the SEC approved the Nasdaq's request to establish a new lower level stock exchange, to be dubbed the BX Venture Market. The Nasdaq's original proposal was back in September 2010.

I am not an expert on the operation of stock markets, but as I understand it, Nasdaq is re-commissioning the Boston Stock Exchange, which they acquired and turned into only a trading venue. Now on the BX Venture Market, companies would get listed much as they do on the higher exchanges, with a company-driven application process rather than the market maker-driven process on the OTC markets.

It appears this will be that long sought after "in between" exchange with lower quantitative and qualitative requirements than the Nasdaq and NYSE AMEX, but more than the over-the-counter markets. There would be a collaboration between Nasdaq and its expertise in overseeing market activity and FINRA's experience overseeing the over-the-counter markets.

Requirements to list on the BXV, among others, would include 1) full reporting company current in filings, 2) independent audit committee, 3) independent directors making compensation decisions, 4) prohibition on "nullifying, restricting or disparately reducing" voting rights, 5) holding an annual shareholders' meeting.

Unfortunately, shell companies would not be allowed to list. Also unfortunately, stock sold by BX listed companies will not be exempt from state securities review as higher exchanges' stock is. Similar to Nasdaq, a change in control of a BX company will require a new initial listing application.

In addition, listed companies would need to have 200,000 publicly held shares, at least 200 public shareholders and a minimum market value of listed securities of $2 million to start and $1 million to maintain. Minimum initial listing price will be $1.00 in most cases and a continuing price of $0.25 will be necessary to keep the listing (this is more than NYSE Amex, which has no minimum price to maintain a listing).

The goal: help companies getting delisted from major exchanges from leaving the "exchange" world, and helping growing companies not quite ready for prime time to get more attention and more transparency.

Yet they are taking pains to make clear this is not a Nasdaq exchange. You can be immediately delisted if you refer to yourself as listed on Nasdaq or as a Nasdaq listed company. Yet Nasdaq will own it and their listing people will handle processing listings and delistings.

Anyway, interesting stuff! Will tell you more as I pore through this 80-page SEC release

For additional insights on reverse mergers, SPACs, other alternatives to traditional initial public offerings, the small and microcap markets and the economy, visit the Reverse Merger and SPAC Blog  by David N. Feldman, Esq., Partner of Richardson & Patel LLP.