What it means
Nasdaq created the Global Select Market in 2006 as a premium tier above the Global Market. To qualify, a company must meet both the initial listing standards and additional tests on liquidity, such as the number of round-lot holders and the market value of shares held by the public.
It must also satisfy the exchange's corporate governance requirements. Its financial tests generally look at measures like earnings, cash flow, market capitalisation and revenue, with alternative routes so that different kinds of company can qualify.
The exact numbers are set by the exchange and updated from time to time, so anyone checking eligibility should read the current rules rather than rely on memory. Many well-known technology, biotechnology and consumer companies trade here.
For investors, the tier acts as a filter. Large index providers and institutional funds often prefer companies with stronger liquidity and governance, so being in the top tier can broaden the potential shareholder base.
Even so, the label is not a recommendation, and Global Select companies can lose value like any others. The tier also affects how companies think about their disclosures and their boards.
Maintaining the listing requires continuing compliance with rules about independent directors, audit committees and timely reporting. A company that falls short may be given time to fix the problem before it is moved to another tier.
For analysts building lists of comparable companies, the tier is a convenient starting point. Combined with sector, size and growth rate, it helps narrow a large universe into a manageable group, although the final comparison should still rest on the financial statements.
There is also a practical angle for treasury teams. A company seeking to raise capital through a share issue may find that its listing tier affects how easily underwriters can place the shares with large institutional buyers, and therefore the cost of raising the money.
In practice
Real-world examples.
Example
A cloud software firm with $2,000,000,000 in market value completes its initial public offering and lists directly on the Nasdaq Global Select Market. Its bankers explain that the tier will make it easier for large funds to buy the stock. The company's treasurer also notes that the listing brings stricter ongoing disclosure and governance duties.
Example
A biotechnology company on the Nasdaq Global Market sees its market value and trading volume rise sharply after a successful drug launch. It applies to transfer to the Global Select Market, which its investors regard as a milestone.
Example
A pension fund has an investment policy that limits holdings in smaller companies. Its analyst uses the Global Select tag as one quick screen when building a shortlist of liquid US equities.
Case study
Seen in the real world.
Redwater Robotics is a fictional company whose shares traded on the Nasdaq Global Market. After three years of rapid growth, it reached a market value of $1,500,000,000 and its daily trading volume was high enough to meet the top tier's liquidity tests. The board asked the finance team to look at the benefits of moving.
The team found that the company met the financial standards and that its governance already complied, since it had a majority of independent directors and a strong audit committee. The move required paperwork and a modest fee, and the chief executive hoped that it would bring more attention from large funds. Before applying, the finance team also confirmed with its legal adviser that no pending disclosure matters would complicate the application.
In this illustrative story, the transfer was approved and the company announced the move to investors. The share price barely changed on the day, which the chief financial officer took as a reminder that the listing tier reflects the company's progress rather than creating value on its own. The company still needed to keep meeting the continued listing standards each year, and the finance team added a quarterly check of the key tests to its compliance calendar, covering share price, public float and board composition.
Watch out
Common mistakes.
- Believing that Global Select means a company cannot fail. The tier reflects meeting listing standards, not guaranteed performance.
- Using NQGS and NASDAQ-100 as the same thing. The NASDAQ-100 is an index of large non-financial companies, while NQGS is a listing tier.
- Assuming the standards never change. The exchange updates its rules, so check the current requirements.
Questions
People also ask.
What does NQGS stand for?
It stands for the Nasdaq Global Select Market, the highest of the three Nasdaq listing tiers, which sits above the Global Market and the Capital Market.
Is it the same as the S&P 500?
No, the S&P 500 is an index selected by a committee, while NQGS is a listing tier based on exchange standards.
Can a company be moved out of the tier?
Yes, if it no longer meets the continued listing standards, it may be moved to a lower tier or delisted.
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