What Is the NASDAQ Global Select Market Composite?
Let me explain the NASDAQ Global Select Market Composite directly: it's a market capitalization-weighted index that includes U.S.-based and international stocks from the NASDAQ Global Select Market. As of August 2020, it had more than 1,400 stocks that satisfy Nasdaq's tough financial and liquidity requirements, along with corporate governance standards.
This composite is more exclusive than the Global Market Composite. Every October, the Nasdaq Listing Qualifications Department reviews the Global Market Composite to see if any stocks qualify for the Global Select Market.
Key Takeaways
- The NASDAQ Global Select Market Composite is a market capitalization-weighted index with about 1,400 stocks representing the NASDAQ Global Select Market.
- NASDAQ has three tiers: The NASDAQ Global Select Market, the NASDAQ Global Market, and the NASDAQ Capital Market.
- The Global Select Market is more exclusive, with stricter financial and liquidity requirements than the Global Market.
- Companies in the Capital Market tier have less stringent requirements and lower market capitalization levels compared to the other two tiers.
Understanding the NASDAQ Global Select Market Composite
This index started in July 2006 when the Nasdaq National Market divided into the NASDAQ Global Market and the NASDAQ Global Select Market. The split was mostly about naming to highlight the global nature of the index and its companies, without changing listing standards. The select index covers about a third of the largest companies on NASDAQ.
Market Capitalization
NASDAQ places companies into tiers based on their market capitalization. The Global Select Market is the most selective, requiring companies to meet the strictest financial standards for this large-cap category. I want you to know that stocks are reviewed every year to confirm they stay in the right tier.
If a stock meets or exceeds the requirements of a higher tier, it can move up. But if it falls short, it gets demoted to a lower tier.
NASDAQ Global Select Market vs. Other NASDAQ Tiers
NASDAQ operates with three tiers: the NASDAQ Global Select Market, the NASDAQ Global Market, and the NASDAQ Capital Market. To list on any, companies must meet financial, liquidity, and corporate governance requirements.
The Global Select Market has the toughest requirements of the three. The Global Market is stricter than the Capital Market, but corporate governance is uniform across all. Remember, even if a company qualifies, NASDAQ can deny listing or add conditions to protect investors and the public.
Requirements for NASDAQ Global Select Market
If you're a company aiming for a NASDAQ listing, you submit an application, and Nasdaq typically processes it in four to six weeks. The Listing Qualifications Staff reviews it initially and sends a comment letter. You then address any issues within a set time. If resolved, you're approved.
The requirements for Global Select are the strictest. To qualify financially, meet all criteria of at least one of four standards: Earnings, Capitalization with cash flow, Capitalization with revenue, or Assets with equity. Liquidity requirements also apply, varying by whether it's an IPO, spinoff, or existing stock.
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