British regulators are mulling a shake-up of London’s stock market listing rules in a bid to revitalise its competitive edge against the New York Stock Exchange.
Announcing the consultation, the Financial Conduct Authority’s chief executive Nikhil Rathi touted London’s “deeply knowledgeable institutional investors, both domestically and internationally based”, but acknowledged the need for flexibility in the capital markets.
“We plan to propose replacing our current standard and premium listing segments for shares in commercial companies with a single listing category with one set of requirements, said Rathi.
Proposed changes included:
- The removal of eligibility rules requiring a three-year financial track record as a condition for listing
- A more permissive approach to dual-class share structures
- The removal of compulsory shareholder votes for large transactions and for related party transactions, whilst maintaining a disclosure regime
The consultation comes in the wake of a major blow to the capital markets, when British semiconductor giant Arm Holdings opted to go for a US listing, marking a £58bn blow to London’s tech ambitions.
A more liberal approach to listings has been on the agenda for at least a year, but has yet to bolster optimism, while the junior AIM market just hit a record low of just nine IPOs in the past 12 months.
Rathi conceded that a lighter approach to listing requirements will inevitably come with investor risk.
“if we move down this route, there will need to be clear acceptance that some investors, even those who do read and understand every word of the disclosure, will lose money, not just uninitiated retail investors,” he said.
The FCA will publish a blueprint for listing reforms in due course.