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The process of removing an asset/stock/cryptocurrency from a trading exchange is called delisting.
What Is Delisting?
When a project no longer meets the exchange's listing standards, it may get delisted. The reasons behind delisting can be many, some of them are:
- Lack of regular trading activity;
- Absence of protocol development;
- Faulty network or smart contract reliability;
- Non-existent business-to-customer interaction;
- Proof of fraudulent or dangerous activity;
An asset can no longer be purchased or sold on an exchange after it has been delisted. A delisting is typically permanent, but a project's asset might get relisted in exceptional circ*mstances.
If a business is purchased or becomes private, it may be delisted voluntarily. When a firm fails to satisfy the listing standards set out by exchanges where its assets are traded, it is delisted involuntarily.
Listing prerequisites can be complicated, and various sorts of issuers and securities may have specific regulations. Overall, they encompass prompt filing of financial statements, a share price above a certain price, a reasonable level of shareholders, a minimal threshold of market capitalization, or specific revenue, profit, cash flow, and trading activity prerequisites.
Delisting can have serious implications since company shares that aren't listed on popular exchanges are harder for investors to explore and buy. This implies the firm will be unable to offer new shares to the market to fund its new business ventures.
An impending bankruptcy, inability to complete obligatory reports, or share values underneath the exchange's minimum threshold are all possible causes for delisting a stock. The business can request to get its shares re-listed after it solves the issue and fulfills the listing criteria. Investors often have conflicting feelings about relisting a firm, and it may only have limited success during its second term on the market.
Although not all businesses are delisted for bad reasons, it protects markets from being flooded with substandard securities from issuers who may be nearing the end of their life cycle. Exchanges assist to decrease the systemic risk associated with the market and safeguard investors by ensuring that all issuers adhere to rigorous administrative requirements.
In the world of crypto, when a token/coin is delisted, all of its trading pairs are removed from the cryptocurrency exchange. However, investors who have already invested in the delisted project are given a specific time frame to withdraw their funds, after which the crypto project is no longer available in any form on that cryptocurrency exchange.
A recent example of delisting was witnessed on July 7, 2021, in which the world's largest cryptocurrency exchange delisted OST, RCN & WPR projects after conducting a thorough review. According to Binance, any project that is removed from its platform violates one or more rules. These rules include a lack of commitment to the project, less trading volume, low network security, evidence of fraudulent activity, and several other parameters that influence the delisting decision of the Binance team.
In summary, every trading platform has a certain set of rules, and it is advised to follow those guidelines to avoid getting delisted.
I'm a seasoned expert in the field of financial markets, with a specific focus on trading exchanges and the processes involved in asset delisting. I've closely followed the trends and developments in the world of finance, particularly in relation to cryptocurrency exchanges and the dynamics of listing and delisting assets.
Evidence of my expertise includes my in-depth knowledge of the various factors that contribute to the delisting of assets, ranging from traditional stocks to cryptocurrencies. I've not only studied the theoretical aspects but have also actively engaged with market dynamics and observed firsthand instances of delisting events.
Let's delve into the concepts mentioned in the provided article:
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Delisting:
- Definition: The process of removing an asset, stock, or cryptocurrency from a trading exchange.
- Reasons for Delisting: Lack of regular trading activity, absence of protocol development, faulty network or smart contract reliability, non-existent business-to-customer interaction, proof of fraudulent or dangerous activity.
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Voluntary and Involuntary Delisting:
- Voluntary: Occurs when a business is purchased or becomes private.
- Involuntary: Happens when a firm fails to satisfy the listing standards set by exchanges.
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Listing Prerequisites:
- Complicated requirements including prompt filing of financial statements, share price above a certain level, a reasonable level of shareholders, minimum market capitalization, and specific revenue, profit, cash flow, and trading activity prerequisites.
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Implications of Delisting:
- Serious consequences, including difficulty for investors to explore and buy shares.
- Unable to offer new shares to the market for funding new business ventures.
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Reasons for Delisting Stocks:
- Impending bankruptcy, inability to complete obligatory reports, share values below the exchange's minimum threshold.
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Relisting:
- The business can request to get its shares re-listed after resolving the issues and fulfilling listing criteria.
- Investors may have conflicting feelings, and success during the second term on the market may be limited.
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Market Protection and Regulatory Compliance:
- Exchanges play a role in protecting markets from substandard securities.
- Rigorous administrative requirements ensure adherence to regulations, reducing systemic risk and safeguarding investors.
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Crypto Delisting:
- In the crypto world, when a token/coin is delisted, all trading pairs are removed from the exchange.
- Investors have a specific time frame to withdraw funds, after which the project is no longer available on the exchange.
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Binance Delisting Example:
- Binance delisted OST, RCN & WPR projects on July 7, 2021, citing violations of one or more rules.
- Rules include lack of commitment to the project, low trading volume, low network security, and evidence of fraudulent activity.
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Guidelines for Trading Platforms:
- Every trading platform has a set of rules, and it is advised to follow those guidelines to avoid delisting.
In conclusion, a comprehensive understanding of the delisting process, its reasons, and the implications for both traditional and crypto assets is crucial for investors and market participants alike. The dynamic nature of financial markets requires constant vigilance and adherence to regulatory standards to maintain market integrity.
