Negotiators have agreed changes aimed at streamlining the listing process on EU stock markets and making the process more proportionate to a company’s size.
The Economic and Monetary Affairs (ECON) Committee negotiators reached an agreement with the European Council on Thursday regarding a set of measures to make public capital markets more attractive for EU companies and facilitate their access to capital.
The provisional agreement aims to improve access to stock markets by alleviating the administrative burden of listing on stock exchanges.
The agreed listing package should streamline the listing process and balance regulatory and compliance costs for companies seeking to list. It also applies to companies that are already listed.
The negotiators also agreed to amend the Markets in Financial Instruments Directive (MIFID) regarding the rules on investment research by third parties.
They say investment firms will have more flexibility to choose the way in which they wish to organise the payments of execution services and research, while being transparent about it. Companies should inform their clients whether they apply a separate or joint payment for services and third-party research and about the measures to prevent or manage conflicts of interest.
Negotiators also reached a provisional agreement to amend the Prospectus regulation, which aims to reduce costs by standardising prospectus formats and use plainer language.
Co-legislators also agreed on common rules on multiple-vote share structure (MVSS) in companies that seek to have their shares traded on an SME growth market and other Multilateral Trading Facilities.
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However, Alfred Sant, the lead MEP, said the end point of negotiations has been “disappointing”. He said negotiations had been encouraging but that the Council had taken a “take it or leave it position” on the multiple voting share structure directive. This was inadequate from the perspective of keeping the capital markets union project on track, Sant said.
Gary Simmons, managing director of equity capital markets at the Association for Financial Markets in Europe (AFME), said the EU Listing Act agreement was a “promising first step” towards increasing Europe’s attractiveness as a desirable location for companies to list.
But AFME has some concerns, including prescriptive page limits for prospectuses.
“Arbitrary page limits on prospectuses and other disclosure documents’ length will not only potentially increase litigation risks for issuers, controlling shareholders, directors and underwriters, but may also result in material risk for investors in not being completely sure that they are being given all of the necessary information to make an investment decision.”
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He said this may encourage listings outside of the EU where no such disclosure limitations are imposed and where jurisdictions may be seen as more flexible alternatives, especially for more complex transactions.
“In light of the dwindling number of EU Initial Public Offerings, the Listing Act alone will not be enough to ensure that the EU is the best place for corporates to go public. In this respect, work is still needed to boost Europe’s equity market liquidity.
“To do this, progress on a meaningful consolidated tape is required, which will provide a single window into investment opportunities across Europe for all investors, democratised regardless of their location or sophistication.”
Simmons added: “Europe is at an important juncture to establish itself as a leading equity market. The opportunity to address some structural issues and revise key capital-market regulations, which govern how markets function in the EU, rests with policymakers.
The provisional deal will be formally adopted by Parliament and Council before it can come into force.
