Nasdaq proposes 'fast entry' rule to speed up index inclusion of large new listings

By Pritam Biswas

Feb 4 (Reuters) - Nasdaq NDAQ.O has proposed a new rule to speed up the addition of newly listed large companies to its index, seeking to address delays that have left major IPOs and exchange transfers outside the benchmark for months.

The proposal comes in what is shaping up to be one of the busiest years for new and some big listings, including IPO plans from Elon Musk's SpaceX and artificial intelligence startup Anthropic.

Advisers for SpaceX, which recently acquired xAI, have reached out to major index providers such as Nasdaq NDAQ.O to discuss joining key indexes sooner than normal, a source familiar with the matter told Reuters late on Wednesday.

SpaceX did not immediately respond to a request for comment, while Nasdaq declined comment.

Under the proposed "Fast Entry" rule, a newly Nasdaq-listed company whose market capitalization ranks among the top 40 current index constituents would be eligible for accelerated inclusion, with at least five trading days' notice and entry after 15 sessions.

The company would be exempt from standard seasoning and liquidity requirements. It would not replace an existing index member and would temporarily increase the number of constituents until the next annual reconstitution, in line with the treatment of spin-offs, Nasdaq said.

"Faster inclusion makes Nasdaq a more complete ecosystem for the big-cats with improved liquidity and tighter spreads as result of passive ownership," said Michael Ashley Schulman, partner and CIO at Running Point Capital Advisors.

The absence of such a system has often resulted in a disconnect between the index and the broader market, given the size and market impact of such companies. Investors also expect the index to reflect the impact of the addition, which is currently not the case.

The proposal would be significant in 2026, with the tech giants leveraging artificial intelligence potentially aiming for hundreds of billions in valuation.

Nasdaq is the choice of exchange for tech giants in the U.S. with trillion-dollar market cap companies such as Alphabet GOOGL.O and Nvidia NVDA.O.

The Nasdaq 100 index .NDX, which houses the biggest names listed on the exchange, is followed by investors and analysts, and serves as a barometer for the health of technology and growth-oriented companies.

"Nasdaq is showing that you are never too big and it is never too late to improve," Schulman said.