“The Best of All Possible Worlds”? The Access of SMEs to Trading Venues: Freedom, Conditioning and Gold-Plating
The regime applicable to small and medium-sized enterprises (SMEs) has become a topic of paramount importance in the context of the burgeoning debate on the need to foster and accelerate the development of EU Capital markets. The development of different types of trading venues in the EU, together with the debate on the access of SMEs to market-based sources of funding, are providing new insights in this respect.
As discussed in my Working paper, the comparison between the rules applicable to SMEs listed on Multilateral Trading Facilities (MTFs) across different EU jurisdictions gives rise to a complex and kaleidoscopic picture, far different from the uniformity that characterizes rules applicable to issuers listed on regulated markets. This ultimately results in different degrees of regulatory and contractual constraints for issuers willing to access MTFs, and has ramifications on several crucial aspects, such as corporate governance, internal monitoring, ownership structure and business strategies. The paper focuses on the most relevant European MTFs that target SMEs, including SME growth markets. The comparison shows that there are at least five variables that have an impact on the access of SMEs to public markets:
- the specific rules applicable to issuers whose shares are listed on regulated markets, set either by EU law or national legislation;
- the effects deriving from self-regulatory codes, established by trading venues (in the EU, at the moment, mostly by regulated markets);
- the rules applicable to issuers who access MTFs, and, among MTFs, SME growth markets;
- the voluntary statutory choices made by issuers;
- the effects induced by the increasing adoption of engagement policies by institutional investors deriving either from specific legislation (Directive (EU) 2017/828—Shareholder Rights Directive II or SHD2), or from a broader market practice or standard.
According to the latest evidence provided by the European Securities and Markets Authority (ESMA), more than 74% of issuers with shares traded on European trading venues now fall into the category of SMEs, as defined by the MiFID II Directive. This is a figure in many ways surprising, and—even if one might question the quantitative parameters that underpin it—it is such as to stimulate, per se, debate on the current structure of capital markets regulation in Europe, well beyond the rules applicable in the context of trading venues. The conditions are perhaps ripe for a radical change of perspective in the EU approach to capital markets regulation. Instead of moving from a regime targeted to large companies (usually listed on regulated markets), and deriving from that regime, by way of mere ‘subtraction’, diversified rules for SMEs, one could take note of the changed factual framework, and re-think accordingly the entire legal framework. This ultimately means elaborating a general EU regime tailored to SMEs, upon which to insert—by way of addition—a special regime only applicable to a smaller number of truly large companies. Operating by ‘subtraction,’ ie regulating SMEs by way of individual exceptions, might not deliver on its objectives. It is a question, then, of trying to imagine a new model for regulating capital markets, to be applied not only to trading venues, but also to other areas of capital markets regulation, within the framework of the Capital Markets Union (CMU) project, which is increasingly oriented towards supporting SMEs’ access to new sources of funding.
Filippo Annunziata is an Associate Professor at the Department of Law at Bocconi University.
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