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Report: Nasdaq increasing restrictions on small Chinese company IPOs

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Report: Nasdaq increasing restrictions on small Chinese company IPOs

Nasdaq Inc. is increasing restrictions on the IPOs of small Chinese companies and slowing their listing approvals, as their low liquidity makes them poor candidates for investing by the institutional players to whom the exchange is catering, Reuters reported.

The low liquidity is a result of the companies raising most of their capital from company insiders in China, who tend to hold their investment, Reuters said.

Nasdaq in October 2018 proposed changes to its listing rules to reduce volatility and increase liquidity. The rules went into effect in August, resulting in longer wait times and increased scrutiny from Nasdaq before some Chinese-company listings can move forward, Reuters said. One way companies are getting their listings approved is by adding U.S. citizens to their boards, Reuters said, citing Chinese executives and investment bankers.

"All companies that seek to list on the Nasdaq Stock Market must meet stringent initial listing standards, including financial, liquidity and corporate governance requirements," Nasdaq spokesperson Emily Pan told S&P Global Market Intelligence. "As the global markets and regulations continue to evolve, we frequently reassess our listing requirements."

Various third-party reports have said the Trump administration is mulling delisting Chinese firms from U.S. stock exchanges and limiting U.S. portfolio investments in China as a way of gaining additional leverage in trade talks with Beijing. However, the U.S. Treasury denied any existing plans in a statement to Bloomberg News.