The FCA has published a discussion paper and a consultation paper as part of its 2016/17 Business Plan commitment to review the structure of the UK’s primary markets to ensure they continue to serve the needs of issuers and investors.

The FCA papers are:

  • Discussion Paper 17/2: Review of the Effectiveness of Primary Markets: the UK Primary Markets Landscape (DP17/2). In DP17/2 the FCA provides an overview of the UK’s primary markets, the place within this of the listing regime, and its own regulatory role. The FCA also discusses some important questions about whether the boundary of the premium listing regime is appropriately drawn, and whether re-drawing the boundary might improve effectiveness for issuers and investors. For example, when the premium and standard listing segments were created, the FCA decided that premium listing should be the exclusive route to market under the listing regime for investment trusts and investment companies. The FCA remain of the view that this decision is correct, but would like to get feedback on whether requiring premium listing is unnecessarily demanding for exchange traded fund issuers. Another question that the FCA raises is whether standard listing is sufficiently understood or valued by issuers and investors to be effective and whether the current split of listing into standard and premium segments is too binary. The FCA also covers some of the potential gaps in the current market structure including concerns that have been raised by some stakeholders about the effectiveness of the UK’s primary equity markets in providing growth capital, particularly for early-stage science and technology companies. The FCA also discusses whether there is a role for a UK primary debt MTF market, similar to those in Luxembourg and Ireland; and
  • Consultation Paper 17/4: Review of the Effectiveness of Primary Markets: Enhancements to the Listing Regime (CP17/4). In CP17/4 the FCA sets out more developed proposals to enhance certain aspects of the Listing Rules. The proposals in CP17/4 take into account the stakeholder feedback the FCA has received as part of its review of the UK’s primary markets and address issues that have emerged from its interactions with issuers and their advisors on transactions. There are three groups of proposals in CP17/4 covering: (i) the requirements in chapter 6 of the listing rules which apply to commercial companies applying for a premium listing of their shares; (ii) the treatment of transactions that are outside the ordinary course of business and which are, or are proposed to be, undertaken by listed issuers. These changes involve the so-called ‘class tests’, used to assess the size of the transaction relative to the listed issuer, and specifically the ‘profits test’; and (iii) the FCA’s approach to suspending the listing of an issuer that has announced a reverse takeover, or where details of such a transaction have leaked.

The deadline for comments to both FCA papers is 14 May 2017.

The FCA expects to publish a policy statement in response to CP17/4 in the second half of 2017.

View FCA reviews effectiveness of UK primary capital markets, 14 February 2017