The Association for Financial Markets in Europe (AFME) has responded to the FCA’s proposed rule changes around the UK’s framework for commercial companies’ equity shares listing, published last week.
The FCA began discussions on the purpose of listed markets in the public capital markets ecosystem in July 2021, which lead to the publication of a discussion paper in May 2022 proposing a single listing segment model for issuers of equity shares in commercial companies.
Such changes “aim to rebalance the regime and improve the competitiveness of the UK equity market,” the FCA says, making it a more “attractive and compelling option” for companies looking to list shares in the UK.
Commenting on the FCA’s proposal, Gary Simmons, managing director of equity capital markets at AFME, says: “These are welcome proposals. In particular, we welcome the intention behind the proposed single listing segment, which builds upon the FCA’s proposed disclosure-based approach to financial information, and will replace the more prescriptive rules requiring, for example, a three-year revenue track record.
“This will provide more flexibility for companies to tailor their disclosure to their own particular company or circumstances and to provide investors with more relevant information on which to make their investment decisions.
“Implemented properly, we believe that these changes will help to make the listing process simpler and more flexible and also provide greater transparency between issuers and investors.”
In addition, AFME recently published its Equity Trading report for Q1 2023, reporting a 70 per cent YoY growth for equity underwriting on European exchanges. Although this was a significant rise, it was facilitated by 2022’s more than decade-low issuance figures. In comparison to two and five year quarterly averages, Q1 2023 saw a 20 per cent decline.
IPOs were observed to have accumulated €1 billion in deal value over the quarter, a 48 per cent decline YoY, with two of the 16 deals representing 80 per cent of the issued amount. On the London Stock Exchange, IPOs were at their lowest deal value since 2009.
Commenting on the statistics, April Day, head of equities at AFME, adds: "Listing rules are only one part of the solution to boosting liquidity. It is important to remember that healthy primary markets are underpinned by vibrant secondary markets, and declining liquidity will not go away without action to ensure competitive secondary markets.
“In this respect, the outcome of the MiFIR review in Europe will be critical, including an ambitious, deep, pre-trade consolidated tape, to help boost liquidity and position Europe as an attractive investment destination.”
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