Listed Security

What Is a Listed Security?

A listed security is a stock, bond, or other investment that trades on a formal stock exchange, such as the New York Stock Exchange or Nasdaq. Before a security can be listed, its issuer, usually a company or government body, must apply to the exchange and meet its listing requirements. Once approved, the security is assigned a ticker symbol and can be bought and sold through the exchange during trading hours. Listing is a formal status, which sets it apart from shares that can only be traded privately.

How Listing Works

Each exchange sets its own standards. These usually cover minimum share price, the number of shareholders, a track record of operations, audited financial statements, and corporate governance practices. Issuers must keep meeting these standards after listing and provide regular disclosures, such as annual and quarterly reports. An issuer that falls short may receive warnings and, if problems continue, may face delisting, which removes the security from the exchange. Many companies first become listed through an initial public offering, although a security can also be listed through a direct listing or a transfer from another market.

An Example

Suppose a regional manufacturer wants its shares to trade on a major exchange. It applies, shows that it meets the exchange's requirements, and receives a ticker symbol. From then on, its shares can be bought and sold on the exchange, and it must keep filing the disclosures the exchange requires. If its reporting lapses or its share count falls below the exchange's minimums, the exchange can issue notices and, if the problem is not resolved, begin the process of delisting.

Why It Matters to Investors

Listed securities are generally easier to research and trade than those that are not listed. Mandatory disclosure gives investors more public information to review, and prices are visible throughout the trading day. Listed securities also tend to have higher liquidity, which usually means it is easier to buy or sell without moving the price much. However, a listing does not guarantee a company's success or protect against losses, and listed securities can still fall sharply in value. Listing also differs from trading in the over-the-counter market, where securities are traded through dealer networks and disclosure rules are often lighter.