Market Capitalization Rule

What It Is:

The market capitalization rule is a regulation that places a floor on the total value of a company's stock for 30 consecutive days.

How It Works/Example:

The market capitalization rule was established by the New York Stock Exchange (NYSE) in 2004. It places a minimum limit on the total value of a registered company's outstanding shares, or a market capitalization. The rule states that a company's market capitalization cannot remain lower than $25 million for a period of more than 30 days in a row. If it is lower than $25 million for longer than 30 days, the listing will be removed from the stock exchange.

For example, if a company's stock trades at a price low enough to render its market capitalization at $20 million for 31 days, that company will be delisted and its stock will no longer be traded on that exchange.

Why It Matters:

The market capitalization rule reinforces the NYSE's registration requirements for companies that wish to go public with their stock. The NYSE temporarily reduced the market capitalization rule to $15 million during the credit crisis of the late 2000s.