Mark Hynes - thoughts on corporate disclosure

Opinions on changing rules, changing best practices, and their effect on investor relations officers.

Thursday, January 18, 2007

In the midst of the battle, a new exchange player emerges

In a week dominated by the contest to own the London Stock Exchange, a new exchange is set to launch. Some of us remember the days of multiple UK stock exchanges – Birmingham, Leeds, Manchester all had their own floors. Now in the West Midlands, a new exchange will target regional businesses who feel that AIM and the Plus Markets are not able to support them.

At the beginning of 2004 the Investbx project was completed, intending to launch the first regional stock exchange in Britain for many decades. Investbx is aimed at being a stock exchange for smaller, local companies to have access to capital using local advisers; the protection of investors was paramount and the market has been designed to meet all the FSA’s regulatory requirements.

However, it was the Regional Development Authority in the West Midlands that had sponsored the stock exchange, within the remit of this and similar RDAs to develop and build the economies of their particular regions. Despite its unique focus on SMEs in the West Midlands, Investbx presented a challenge to existing players, and as a result it was referred to the European Competition Commission for abuse of state aid.

Now the project has been cleared by Brussels. In announcing the decision, Competition Commissioner Neelie Kroes said: "This aid will help growing SMEs get access to capital. Improving information transparency on the risk capital market will attack the very source of the market failure. I appreciate in particular that all equity investment at Investbx will be provided by private investors. Investbx is a very innovative project, which may be a valuable precedent for other Member States."

Are the established UK stock markets are failing small companies? And will that failure continue under potentially new ownership? Only time will tell.

However access by large numbers of British and European SMEs to equity capital has not improved. This was the original concern that gave rise to the project in the first place.


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