Our Legal and Primary Markets Expert Groups contributed to our response to the FCA's review of the UK's primary markets.
We emphasised that, with regards to premium listings, the equality of treatment between UK and overseas companies is important and commented that overseas companies should not be exempt from complying with the premium listing regime. We commented that the UK listing regime should be flexible and offer alternative options to issuers that do not meet the “super-equivalent” requirements for a premium listing. We noted that the standard listing regime provides a useful route to the market for these issuers.
We noted our concern that creating a distinct international segment could overly complicate the range of markets, and the corresponding levels of regulation, available to issuers and investors. We added that it could undermine the advantages and prestigious reputation of a premium listing. Furthermore, if the new international segment imposed less regulation on overseas issuers than is currently imposed upon premium listed issuers, but more than the minimum EU requirements imposed on standard listed issuers, then this could be an easier route to a London listings for overseas issuer compared to a UK issuer.
This could result in the potential situation where a UK issuers are incentivised to use the parent company of their group to be incorporated outside the UK and subsequently undermine the premium segment. We suggested focussing on enhancing the current premium listing segment – for example, modifying the minimum free float requirements – so that it increases its appeal to overseas issuers while not disadvantaging UK issuers.
We noted that the current equity market structure, rigid corporate ownership models and the UK's investment culture were the primary factors that reduced the effectiveness of the UK's public equity markets in providing scale-up capital. Equally, with regards to improving the provision patient capital, we encouraged the FCA and the Government to focus on the needs of small companies first when considering amendments to the primary market regulatory framework.
We noted that the small and mid-size quoted company sector has many features of a long-term capital market which are absent in the more liquid securities of larger companies. We commented that the securities of smaller companies are relatively illiquid and therefore institutional and private investors understand that they must build and increase their stake patiently. We noted that for a long-term capital market to flourish the different sizes of companies need to have different types of characteristics in trading platforms, trade reporting, clearing and settlement.