Nasdaq has proposed new Rule 5120 permitting Nasdaq to halt trading in a security and request information from the company regarding the number of unrestricted publicly held shares when Nasdaq observes unusual trading characteristics in a security or a company announces an event that may cause a contraction in the number of unrestricted publicly held shares.

Nasdaq notes illiquid securities may trade infrequently and in a more volatile manner and change hands at a price that may not reflect their true market value. Less liquid securities may also be more susceptible to price manipulation as a relatively small amount of trading activity can have an inordinate effect on market prices.

Under proposed Rule 5120, in considering whether there are unusual trading characteristics, Nasdaq may review volume, price movements, spread and the presence or absence of any news. Events that may cause a contraction in the number of unrestricted publicly held shares include reverse stock splits, tender offers, stock buybacks, or entering into contractual agreements such as standstills or lockups.