As part of the ongoing objective of a Capital Markets Union, the European Union has announced new proposals aimed at making it easier for firms to list securities across the EU.
According to a statement by the EU:
Today’s proposed measures will:
- Make our clearing landscape more attractive by enabling central counterparties (CCPs) – which provide clearing services – to expand their products quicker and easier, and by further incentivising EU market participants to clear and build liquidity at EU CCPs.
- Help build a safe and resilient clearing system, by strengthening the EU supervisory framework for CCPs and drawing lessons from the recent developments in energy markets caused by Russia’s aggression against Ukraine. For example, by increasing the transparency of margin calls, so that market participants (including energy firms) are in a better position to predict them.
- Reduce excessive exposures of EU market participants to CCPs in third countries, particularly for derivatives identified as substantially systemic by the European Securities and Markets Authority. Today’s proposal requires all relevant market participants to hold active accounts at EU CCPs for clearing at least a portion of certain systemic derivative contracts. This will improve the management of financial stability risks in the EU.
Additionally, the process for a firm to go through insolvency proceedings will be harmonized as currently member states each approach the process differently.
The proposal addresses the prospectus requirements for a firm to list shares, a process that may entail documents topping 800 pages. The EU seeks to reduce the paperwork and simplify the documentation requirements. Estimates anticipate EU listed companies will save €100 million per year from lower compliance costs, with companies saving €67 million per year from simpler prospectus rules alone.
For smaller firms, the EU will allow SMEs to list shares on “growth markets,” including shares with various voting rights – something that allows insiders to maintain control.
Valdis Dombrovskis, European Commission Executive Vice-President for an Economy that Works for People, commented on the proposal.
“There is no better time to help Europe’s companies access different sources of finance, so they can grow and innovate, create jobs and attract investment. This has always been the goal of the Capital Markets Union. We have made good progress but can do more. So today, we are making it even easier for companies to list on stock exchanges, giving them more funding choices. We are also improving the EU’s clearing system: the market infrastructure that capital markets need to function efficiently. More alignment of national rules on corporate insolvency will boost cross-border investment. This also comes with simpler procedures for micro-businesses. Today’s package is another step forward to strengthen Europe’s economy and to sustain our long-term growth.”
Mairead McGuinness, Commissioner for Financial Services, Financial Stability and Capital Markets Union, described the initiative as “three big steps” towards Capital Markets Union – long a key goal of the EU. McGuinness noted they are “reducing cost and the paperwork for companies that want to list on EU stock markets.”
No time frame for enactment was provided.