Britain’s regulatory body, the Financial Conduct Authority (FCA), unveiled a new set of rulings on Friday that aims to supercharge London’s role as a global center for listing companies on par with that of the New York Stock Exchange (NYSE) and the EU following Brexit.
Originally made public earlier this year, the revised rulings are set to target a form of dual class share structures in premium listings for five years — an attractive offer for company founders and one that is currently available within the New York market. The five-year ruling will allow founders to maintain more control upfront, though there may be some concern about dilutions of investor protections.
Other rulings include reducing the amount of shares an issuer is required to have in public hands, known as the “free float,” from 25% to 10%, reducing potential barriers for issuers created by current requirements.
The FCA has also confirmed the minimum market capitalization (MMC) threshold for both the premium and standard listing segments for shares in ordinary commercial companies is to increase from £700,000 to £30 million. According to the FCA, raising the MMC will give investors greater trust and clarity about the types of company with shares admitted to different markets.
“We need to act to meet the needs of an evolving marketplace,” said Clare Cole, director of market oversight at the FCA.
“These changes ensure the UK’s markets maintain their reputation for dynamism, helping support the new types of companies seeking the investment that drives economic growth and by giving investors more choice with appropriate protection,” Cole added.
The London Stock Exchange has been working for years now to catch up with the its bigger brothers across the pond. Looking solely at daily volumes, some the biggest U.S. stocks now trade more than the largest European markets.
According to the research department at Statista, the average number of daily trades made on the LSE massively jumped in March of 2020, with over 2,000 companies trading. However, since the coronavirus pandemic, the total market value of companies on the LSE has fallen significantly, before rising again in late 2020 to reach just over 1 million in early 2021. As of October 2021, the value had fallen again to 936,500.
The government, however, is eager to help the City of London catch up with New York in listings and meet tougher competition from EU financial centers like Amsterdam, Reuters reported.
“We are delighted with these changes – particularly the minimum market capitalization requirement for the standard list, which will encourage SMEs to list on a venue with proportionate regulation and support,” Alasdair Haynes, CEO of Aquis Stock Exchange, told Reuters.
In August, the FCA released a series of new rules intended to make it easier to list special purpose acquisition companies or SPACs. These SPACs are a mainstay of the New York exchange with approximately $125 billion of these ‘blank check’ companies entering the listing to date via Wall Street.
Hambro Perks, a British investment firm, was the first — and so far only — SPAC on the LSE in November following the August rulings.