COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulations (EU) No 596/2014 and (EU) 2017/1129 as regards the promotion of the use of SME growth markets
Date: 2018-05-24
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: bond, capital market, economic growth, insider trading, investment protection, issue of securities, private equity, shareholder, small and medium-sized enterprises, stock-exchange listing

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 24.5.2018 SWD(2018) 243 final  COMMISSION STAFF WORKING DOCUMENT  IMPACT ASSESSMENT  Accompanying the document Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL   amending Regulations (EU) No 596/2014 and (EU) 2017/1129 as regards the promotion of the use of SME growth markets {COM(2018) 331 final} - {SEC(2018) 247 final} - {SWD(2018) 244 final}  
 
 
Table of Contents 

Table of Figures .................................................................................................................. 3 

Glossary .............................................................................................................................. 4 

1

  Introduction: Political, legal and market context ........................................................... 5 

1.1

  Legal background ................................................................................................... 5 

1.2

  Policy context ......................................................................................................... 7 

1.3

  Market context ...................................................................................................... 10 

1.3.1

  A persistently low and concentrated SME IPO activity .............................. 10 

1.3.2

  Underdeveloped SME bond markets .......................................................... 11 

2

  Problem definition ....................................................................................................... 11 

2.1

  What are the problems .......................................................................................... 12 

2.1.1

  Supply side: high compliance costs for listed SMEs .................................. 12 

2.1.2

  Demand side: Insufficient liquidity on SME-dedicated markets ................ 13 

2.2

  What are the problem drivers? .............................................................................. 15 

  Administrative  and  regulatory  burden  on  SME  issuers  stemming  from  the 
2.2.1
application of MAR and the Prospectus Regulation ............................................... 15 

2.2.2

Inadequate definition of SME Growth Markets .......................................... 18 

  Lack  of  schemes  (mechanisms)  to  promote  trading  and  liquidity  on  SME 
2.2.3
Growth Markets ...................................................................................................... 20 

2.2.4

  Out-of-scope drivers .................................................................................... 21 

2.3

  Consequences: less capital raised by SMEs on public markets ............................ 21 

2.4

  Wider consequences ............................................................................................. 23 

2.5

  How will the problem evolve? .............................................................................. 25 

3

  Why should the EU act? .............................................................................................. 26 

3.1

  Legal basis ............................................................................................................ 26 

3.2

  Subsidiarity: Necessity of action of the European Union ..................................... 26 

3.3

  Subsidiarity: Added value of EU action ............................................................... 27 

4

  Objectives: What is to be achieved? ............................................................................ 28 

5

  What are the available policy options? ........................................................................ 28 

5.1

  What is the baseline from which options are assessed? ....................................... 29 

5.2

  Policy options addressing administrative compliance costs ................................. 30 

5.2.1

  Options under the Market Abuse Regulation .............................................. 30 

5.2.2

  Options under the Prospectus Regulation ................................................... 32 

5.3

  Policy options concerning the SME Growth Market definition ........................... 32 

5.3.1

  Defining criteria and thresholds for equity and debt-only issuers .............. 32 

5.3.2

  Half-yearly reports ...................................................................................... 33 

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5.4

  Policy options to address liquidity on SME Growth Markets .............................. 33 

5.5

  Options discarded at an early stage ...................................................................... 34 

6

  What are the impacts of the policy options? ................................................................ 34 

6.1

  Policy options addressing administrative compliance costs ................................. 34 

6.1.1

  Market Abuse Regulation ........................................................................... 34 

  Prospectus/  transfer  of listing from  an SME Growth  market to  a regulated 
6.1.2
market  ..................................................................................................................... 41 

6.2

  Policy options concerning the SME Growth Market concept .............................. 43 

6.2.1

  SME Growth Market defining criteria and thresholds ................................ 43 

6.2.2

  Half-yearly report ........................................................................................ 48 

6.3

  Policy options to address liquidity in SME Growth Markets ............................... 50 

7

  Preferred option ........................................................................................................... 53 

7.1

  Overall impact of the preferred option ................................................................. 53 

7.2

  Macro-economic impacts ..................................................................................... 56 

7.3

  Small and medium-sized enterprises .................................................................... 57 

7.4

  UK leaving the EU ............................................................................................... 57 

7.5

  EU and Member State budgets ............................................................................. 58 

7.6

  Social impacts ....................................................................................................... 58 

7.7

  Impact on third countries ...................................................................................... 59 

7.8

  Environmental impacts ......................................................................................... 59 

7.9

  Impact on competitiveness ................................................................................... 59 

7.10

 Coherence ............................................................................................................. 59 

7.11

 REFIT (simplification and improved efficiency) ................................................. 60 

8

  How will actual impacts be monitored and evaluated? ............................................... 61 

Annex 1: Procedural information ..................................................................................... 63 

Annex 2: Stakeholder consultation ................................................................................... 65 

Annex 3: Who is affected and how?................................................................................. 77 

Annex 4: Definitions ........................................................................................................ 82 

Annex 5: Out-of-scope drivers ......................................................................................... 84 

Annex 6: Discarded options ............................................................................................. 87 

Annex 7: Additional Market Background ........................................................................ 90 

Annex 8: The impact of developed SME Growth Markets on the whole funding escalator 
of companies ..................................................................................................................... 92 

Annex 9: business models of SME brokers and liquidity issue ....................................... 95 

Annex 10: Implications of the European Tick Size Regime for liquidity on SME Growth 
Markets ............................................................................................................................. 96 

Annex 11: Market Abuse data received from National Competent Authorities .............. 99 

Annex  12:  Determining  the  appropriate  debt  issuance  size  to  define  an  SME  issuer  on 
debt-only SME Growth Markets .................................................................................... 100 

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Annex 13: Market Data collected from European MTFs ............................................... 102 

Annex 14: The current regulatory environment of 'SME Growth Markets' ................... 110 

Annex 15: EU Acts and alleviations granted to SME Growth markets issuers ............. 112 

Annex 16: Assessment of Policy Options - Synthesis Table ......................................... 113 

Annex 17: Explanatory graph on the extension of the time-period to disclose managers’ 
transactions ..................................................................................................................... 114 

TABLE OF FIGURES 

Figure 1 - Legislative scope of regulated markets vs. SME Growth Markets ................... 8 

Figure 2 – SME Listing Package actions and objectives ................................................. 10 

Figure  3  –  IPO  values,  number  of  IPOs,  average  capitalisation  and  average  number  of 
listed companies on European junior markets .................................................................. 11 

Figure 4 – Comparison of selected alternative markets: turnover ratio ........................... 14 

Figure 5 – Comparison of selected regulated markets: turnover ratio ............................. 15 

Figure 6 – Companies moving from SME-dedicated markets to regulated markets ....... 18 

Figure 7 – Average annual value of shares traded by market cap band, AIM ................. 19 

Figure  8  –  Initial  Public  Offerings  and  Secondary  Public  Offerings  by  Growth 
Companies in Advanced economies (Billions, USD, 2014) ............................................ 23 

Figure 9 –  Problem tree ................................................................................................... 26 

Figure  10  –  Average  market  capitalisation  of  companies  listed  on  a  selection  of  SME-
dedicated MTFs ................................................................................................................ 47 

Figure 11 – Average value of outstanding issuances per issuer per year ......................... 48 

Figure 12 – Summary of the preferred options ................................................................ 56 

Figure  13  –  Distribution  of  retail  and  institutional  investors  in  selected  EU  MTFs  vs. 
regulated markets ............................................................................................................. 91 

Figure  14  –  Distribution  of  domestic  and  foreign  investors  in  selected  EU  MTFs  vs. 
regulated markets ............................................................................................................. 91 

Figure  15  –  Free  float  requirement  and  minimum  capitalisation  on  EU  SME-dedicated 
MTFs ................................................................................................................................ 92 

Figure 16 – Evolution of market capitalisation segments ................................................ 94 

Figure 17 – Average brokerage fees by market capitalisation ......................................... 96 

Figure  18  –  Tick  sizes  mandated  by  Commission  Delegated  Regulation  2017/588  for 
liquidity bands and price ranges respectively ................................................................... 99 

3 

 
 
 
 
 
 
GLOSSARY 

Acronym 

Meaning or definition 

AMP 

CEE 

CMU 

CRA 

CSDR 

EGESC 

ELTIFs 

ESMA 

EU 

GAAP 

HFT 

IAS 

IASB 

IBO 

IFRS 

IPO 

Accepted Market Practice 

Central and Eastern Europe 

Capital Markets Union  

Credit Rating Agency 

Central Securities Depositories Regulation 

Expert Group of the European Securities Committee 

European long-term investment funds Regulation:  

European Securities and Markets Authority 

European Union 

Generally accepted accounting principles 

High-Frequency Trading 

International Accounting Standards 

International Accounting Standards Board  

Initial Bond Offering 

International Financial Reporting Standards  

Initial Public Offering 

MAR/MAD 

Market Abuse Regulation/Directive 

MiFID II 

Markets in Financial Instruments Directive II 

MTF 

NCA 

OECD 

PCA 

PDMR 

PE 

PP 

PR 

RM 

SME 

STOR 

TFEU 

VC 

Multilateral Trading Facility 

National Competent Authority 

The Organisation for Economic Co-operation and Development  

Person Closely Associated 

Person Discharging Managerial Responsibilities 

Private Equity 

Private Placement 

Prospectus Regulation  

Regulated markets (also called 'main markets') 

Small and medium-sized enterprise 

Suspicious Transaction and Order Reports  

Treaty on the Functioning of the European Union 

Venture Capital 

4 

 
 
 
1

INTRODUCTION: POLITICAL, LEGAL AND MARKET CONTEXT 

The  Capital  Markets  Union  (CMU)  initiative  aims  at  diversifying  sources  of  financing  for 
European  companies,  in  order  to  stimulate  investment,  economic  growth,  job  creation  and 
sustainable development. Through both the CMU Action Plan and CMU Mid-Term Review, 
the Commission adopted many proposals to foster corporates' access to capital in their early 
development  stages,  including  the  review  of  EU  regulations  on  venture  capital 1 and  the 
proposals on crowdfunding2. In order to further ease companies' growth and scaling up, more 
needs  to  be  done  at  the  following  stage,  i.e.  to  raise  capital  on  public  markets.  Although 
listing  on  a  regulated  market  is  more  suitable  for  large  firms,  small  and  medium-sized 
enterprises (SMEs) can list their shares and bonds on so-called junior markets. These markets 
are important precisely as they make the link between private equity financing and the main 
public markets. Over the past decade, however, most of these junior markets in Europe have 
been  struggling.  Among  other  factors,  the  lack  of  SME  visibility  towards  investors,  low 
levels of liquidity, SMEs’ insufficient knowledge of the listing process and high compliance 
costs can explain why few SMEs seek financing on public capital markets. 

This  Impact  Assessment  accompanies  a  proposal  for  a  regulation  and  a  Commission 
Delegated Regulation that would tackle certain regulatory impediments for issuers on junior 
capital  markets.  In  particular,  it  examines  a  number  of  technical  amendments  aiming  to 
reduce the regulatory burden on SMEs listed on public markets and to enhance the liquidity 
of  these  markets.  These  targeted  changes  will  not  fully  revive  junior  markets  in  Europe  on 
their own. Nevertheless, they address regulatory barriers flagged by stakeholders as inhibiting 
SME access to public markets. They do so whilst preserving the highest standards of investor 
protection and market integrity. Moreover, the adjustments should be considered to be only 
one part of a broader package of measures, the 'SME listing package'3, which also targets the 
remaining  issues  preventing  SMEs  from  raising  capital  on  public  markets.  Any  changes 
proposed as a result of this analysis should therefore be understood as a first step in the right 
direction,  and  not  as  a  single  remedy  in  itself.  While  this  impact  assessment  considers  the 
problems that can be tackled through regulatory amendments, the other measures making up 
the SME listing package are non-regulatory. 

1.1

Legal background 

When companies choose to raise capital through the issuance of shares or bonds in the EU, 
they  can  do  so  either  on  regulated  markets  (‘RMs’,  also  called  'main  markets')  or  on  a 
Multilateral  Trading  Facility  (MTF) 4 ,  both  categories  being  defined  by  the  Markets  in 
Financial  Instruments  Directive  II  (MiFID  II).  While  either  type  of  market  is  accessible  to 
companies of all sizes, regulated markets are generally more appropriate for large and mature 
businesses.  Listing  on  these  markets  will  provide  access  to  deeper  pools  of  capital  and 

1 Proposal 461/2016 of the European Commission for a Regulation of the European Parliament and of the Council amending 
Regulation  (EU)  No  345/2013  on  European  venture  capital  funds  and  Regulation  (EU)  No  346/2013  on  European  social 
entrepreneurship funds 
2 Proposal  113/2018  of  the  European  Commission  for  a  Regulation  of  the  European  Parliament  and  of  the  Council  on 
European Crowdfunding Service Providers (ECSP) for Business and Proposal 99/2018 of the European Commission for a 
Directive  of  the  European  Parliament  and  of  the  Council  amending  Directive  2014/65/EU  on  markets  in  financial 
instruments 
3 Communication from the Commission on the mid-term review of the capital markets union action plan ({SWD(2017) 224 
final} and {SWD(2017) 225 final} of 8 June 2017) 
4 A Multilateral Trading Facility (MTF) is a trading venue where companies may list their financial instruments, with lower 
regulatory requirements than on main regulated markets 

5 

 
 
 
 
                                                 
liquidity,  and  companies  will  benefit  from  a  higher  public  profile  (media  coverage, 
investment research, etc.). However, regulated markets require companies to comply with a 
wider range of EU regulations concerning initial and ongoing disclosure, market abuses, and 
accounting  among  others  (such  as  the  Transparency  Directive 5,  the  Shareholders'  Rights 
Directive 6 and  the  Takeover  Bid  Directive 7).  This  implies  a  significantly  higher  cost  of 
listing. While the benefits will offset these costs for larger companies, smaller companies will 
usually  reap  fewer  benefits  from  a  regulated  market  listing  and  often  lack  the  resources  to 
meet the higher regulatory requirements. 

MTFs are generally more appropriate for smaller, fast-growing companies, as issuers on these 
markets  do  not  have  to  comply  with  all  the  European  legislation  applicable  to  companies 
listed  on  a  regulated  market.  MTFs  are  usually  regulated  through  the  listing  rules  of  the 
exchange.  Across  the  European  Union,  a  large  number  of  regulated  market  operators  also 
have  alternative  MTFs,  targeting  specifically  smaller  issuers.  These  'junior  markets'  (also 
called  alternative  markets  or  trading  platforms)  "offer  more  flexible  listing  criteria,  eased 
disclosure  requirements  and  comparatively  low  admission  costs,  so  as  to  cater  to  SMEs' 
inherent characteristics"8. According to Europe Economics, there were 40 MTFs dedicated to 
small and medium-sized enterprises across the European Union in February 20159. 

Since January 2018, the Markets in Financial Instruments Directive II has also introduced a 
new  category  of  MTFs,  the  SME  Growth  Markets,  to  "make  it  attractive  for  investors,  and 
provide  a  lessening  of  administrative  burdens  and  further  incentives  for  SMEs  to  access 
capital  markets"10.  For  an  MTF  to  qualify  as  an  SME  Growth  Market,  at  least  50%  of  the 
issuers whose financial instruments are traded on the trading venue MTF need to be SMEs, 
defined by the Markets in Financial Instruments Directive II  as companies with an average 
market  capitalisation  of  less  than  EUR  200  million 11 .  In  order  to  guarantee  investor 
confidence,  the  listing  rules  of  SME  Growth  Markets  must  also  satisfy  certain  quality 
standards, including an appropriate admission document (when a prospectus is not required) 
and  periodic  financial  reporting.  The  SME  Growth  Market  framework  was  developed  to 
further acknowledge the special needs of SMEs entering the equity and bond markets for the 
first  time.  Several  acts  of  the  European  Union  already  refer  to  this  new  form  of  trading 
venues,  such  as  the  recent  Prospectus  Regulation 12,  the  European  Venture  Capital  Fund 
Regulation13 and  the  Central  Securities  Depositaries  Regulation14 (see  annex  14  for  more 
details). As the cost of drawing up a prospectus can be disproportionately high for SMEs, the 
Prospectus Regulation has also introduced a reduced disclosure regime for SMEs which have 
no securities admitted to trading on a regulated market. 

5 Directive 2004/109/EC of the European Parliament and of the Council on the harmonisation of transparency requirements 
in relation to information about issuers whose securities are admitted to trading on a regulated market 
6 Directive 2007/36/EC as regards the encouragement of long-term shareholder engagement 
7 Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover bids  
8 OECD, Opportunities and Constraints of Market-based financing for SMEs, September 2015 
9  Europe  Economics,  Data  Gathering  and  Cost  analysis  on  Draft  Technical  Standards  Relating  to  the  Market  Abuse 
Regulation (2015) 
10 MiFID II Recital 132 
11 On the basis of end-year quotes for the previous three calendar years 
12 Regulation  (EU)  2017/1129  of  the  European  Parliament  and  of  the  Council  of  14  June  2017  on  the  prospectus  to  be 
published when securities are offered to the public or admitted to trading on a regulated market. 
13 Regulation (EU) 2017/1991 of the European Parliament and of the Council of 25 October 2017 amending Regulation (EU) 
No 345/2013 
14 Regulation  (EU)  No 909/2014  of  the  European  Parliament  and  of  the  Council  of  23 July  2014  on  improving  securities 
settlement in the European Union and on central securities depositories 

6 

 
 
                                                 
Since  its  entry  into  application  on  1  July  2016,  the  Market  Abuse  Regulation15 (MAR)  has 
been  extended  to  MTFs,  including  SME  Growth  Markets.  It  provides  for  two  specific 
alleviations for SME Growth Market issuers (see below in the Section Problem Drivers). The 
Market  Abuse  Regulation  is  a  comprehensive  legislative  framework  that  aims  to  increase 
investor confidence and market integrity, by prohibiting to (i) engage or attempt to engage in 
insider  dealing;  (ii)  recommend  that  another  person  engage  in  insider  dealing  or  induce 
another person to engage in insider dealing; (iii) unlawfully disclose inside information16 or 
(iv) engage in or attempt to engage in market manipulation. Issuers are also subject to several 
disclosure  and  record-keeping  obligations  under  the  Market  Abuse  Regulation.  Relevant 
issuers are notably under a general obligation to disclose inside information to the public as 
soon as possible. 

Figure 1 - Legislative scope of regulated markets vs. SME Growth Markets 

Regulated Market 

SME Growth Market 

MIFID II 

MAR 

Prospectus Regulation 

Transparency Directive 

Takeover bid Directive 

Shareholders' Rights Directive 

Mandatory use of IFRS 

Non-financial reporting Directive 

Source: Commission services 

1.2

Policy context 

Only if there is offer of securities to the public 

Newly listed SMEs are a key motor of new investment and job creation. Companies recently 
listed  often  outstrip  their  privately-owned  counterparts  in  terms  of  annual  growth  and 
workforce  increase 17 .  The  benefits  of  listing  include  a  reduced  dependency  on  bank 
financing,  a  higher  degree  of  diversification  of  investors,  easier  access  to  additional  equity 
capital  and  debt  finance  (through  secondary  offers)  and  higher  public  profile  and  brand 
recognition.  From  the  investors'  angle,  companies  with  a  small  market  capitalisation  (small 
caps) have, on average, a higher risk-return profile than large companies18. 

In  order  to  support  jobs  and  growth  in  the  EU,  facilitating  access  to  finance  for  SMEs  has 
been a key goal of the Capital Markets Union (CMU) from the outset. Since the publication 
of  the  Capital  Markets  Union  Action  Plan  in  2015,  some  targeted  actions  were  taken  to 
develop  adequate  sources  of  funding  for  SMEs  through  all  their  stages  of  development. 
Among  others,  the  Commission  has  taken  forward  a  comprehensive  package  of  legislative 
and non-legislative measures to scale up Venture Capital (VC) financing in Europe, including 
the creation of a Venture Capital fund-of-funds supported by the EU budget and the review of 
regulation on European Venture Capital and European Social Entrepreneurship funds. 

15 Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market 
abuse regulation) 
16 This arises if any natural or legal person discloses inside information in a situation other than the normal course of their 
employment, profession or duties 
17 For example, during the period 2006-2012, the annual turnover of companies listed on NASDAQ OMX's junior market - 
First North - grew by 25 %, compared to 10 % for private companies in the Nordics.   
18 European Issuers, FESE and EVCA, EU IPO Report, 23 March 2015; FESE, A blueprint for European Capital Markets, 
2014; MiddleNext and La Financière de l'Echiquier, The 2016 European Small and Mid Cap Outlook, 2016 

7 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
In its Mid-term Review of the Capital Markets Union Action Plan19 published in June 2017, 
the Commission chose to raise its level of ambition and strengthened its focus on SME access 
to  public  markets.  Importantly,  the  Commission  also  recognised  that  there  was  no  'silver 
bullet' to restore the markets of SME initial public offerings (IPO) across the EU. 

The  Commission  has  therefore  decided  to  set  in  motion  several  non-legislative  actions 
aimed at reviving the public markets for SMEs. First, building on the conclusions of the 
Call  for  Evidence 20 ,  the  Commission  committed  to  assessing  the  impact  of  Markets  in 
Financial  Instruments  Directive  II  (MiFID  II)  level  2  rules,  requiring  the  unbundling  of 
research from trading commissions, on SME equity and bond research coverage. Second, the 
Commission  will  identify  and  share  best  practices  of  financial  schemes  set  up  by  national 
promotional banks that help SMEs bear initial public offering costs. Third, the Commission 
will  explore  how  an  EU  financial  support  can  help  SMEs  at  the  stage  of  an  initial  public 
offering.  Fourth,  the  Commission  will  continue  working  with  the  International  Accounting 
Standard  Board  (IASB)  and  all  interested  stakeholders  to  improve  International  Financial 
Reporting  Standards  (IFRS)  acceptance  by  developing  an  application  toolbox  and  by 
clarifying  disclosures  for  SMEs  through  the  IASB's  Disclosure  Initiative.  Although  still  in 
discussion,  these  various  measures  will  mostly  aim  at  improving  the  visibility  and 
attractiveness  of  SME  securities  towards  investors,  and  at  reviving  the  ecosystem  of  SME-
specialised intermediaries that intervene in the listing process (cf. figure 2). 

Last but not least, the Commission has committed to publishing  'an impact assessment that 
will  explore  whether  targeted  amendments  to  relevant  EU  legislation  could  deliver  a  more 
proportionate  regulatory  environment  to  support  SME  listing  on  public  markets'.  This 
measure  constitutes  the  regulatory  part  of  the  SME  listing  package  announced  in  the  Mid-
Term  Review  of  the  CMU  Action  Plan.  Progress  has  already  been  made  in  the  context  of 
CMU to make it easier and cheaper for smaller companies to access public markets, notably 
with  the  creation  of  the  alleviated  'EU  Growth  Prospectus'  through  the  revised  Prospectus 
Regulation.  Nevertheless,  stakeholders  expressed  through  various  dialogues21 and  previous 
public consultations (such as the CMU public consultation22, the Call for evidence on the EU 
regulatory  framework  for  financial  services 23  and  the  CMU  Mid-Term  Review  public 
consultation24), that more needed to be done on the regulatory side to ensure that SMEs could 
reap the full benefits of public markets.  

19 Communication from the Commission on the mid-term review of the capital markets union action plan ({SWD(2017) 224 
final} and {SWD(2017) 225 final} – 8 June 2017) 
https://ec.europa.eu/info/sites/info/files/communication-cmu-mid-term-review-june2017_en.pdf 
20 Communication from the Commission  – Call for evidence on the EU framework for financial services ({SWD(2016) 359 
final}  - 23 November 2016) 
http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52016DC0855&from=EN 
21 Technical workshops on 'Barriers to Listing for SMEs' held by the Commission on 7 October and 8 December 2016 
22 Green Paper on Building a Capital Markets Union 
http://ec.europa.eu/finance/consultations/2015/capital-markets-union/index_en.htm 
23Call evidence on the EU regulatory framework for financial services 
http://ec.europa.eu/finance/consultations/2015/financial-regulatory-framework-review/index_en.htm 
24 Public consultation on the Capital Markets Union Mid-term Review 2017 
https://ec.europa.eu/info/consultations/public-consultation-capital-markets-union-mid-term-review-2017_en 

8 

 
 
 
 
                                                 
Figure 2 – SME Listing Package actions and objectives 

Source: European Commission services 

On 29 June 2017, the Council underlined that it 'welcome[d] the Commission's commitment 
to  deliver  a  more  proportionate  regulatory  environment  to  support  SME  listing  on  public 
markets,  which  –  coupled  with  related  non  legislative  actions  –  would  further  promote  the 
development of equity capital markets across all Member States'25. 

While  conducting  this  proportionate  review  of  regulatory  barriers  to  SME  listing,  the 
Commission  has  decided  to  follow  two  guiding  principles.  First,  this  review  should  make 
sure that no proposed change undermines investor protection and market integrity or weakens 
core  principles  of  acts  of  the  European  Union  that  were  crucial  in  restoring  confidence  in 
financial markets (such as the Market Abuse Regulation). Second, the Commission considers 
that  SMEs  listed  on  regulated  markets  should  remain  outside  the  scope  of  this  exercise. 
Requirements imposed on regulated market issuers should apply in a similar way regardless 
of the size of the company, so that investors on regulated markets feel confident that issuers 
are  subject  to  one  single  set  of  rules.  Different  requirements  for  SMEs  compared  to  large 
capitalisations  on  those  trading  venues  are  likely  to  confuse  stakeholders,  and  in  particular 
investors. Therefore, this review will not interfere with the rulebook of the European Union 
applicable  to  regulated  market  issuers.  It  will  be  strictly  confined  to  SME  Growth  Markets 
and companies listed on those trading venues, a position also in line with a resolution adopted 
on 19 January 2016, by the European Parliament, which called on the Commission and the 
Member States "to make active use of the SME Growth Market category in future financial 
services  regulation".  As  a  result,  only  legal  texts  applicable  to  SME  Growth  Markets  are 
considered  in  the  context  of  this  initiative  (i.e.  Market  Abuse  Regulation,  Prospectus 
Regulation and the MiFID II – see figure 1 for more details). 

25 Council  conclusions  on  the  Commission  Communication  on  the  mid-term  review  of  the  Capital  Markets  Union  Action 
Plan  (11  July  2017)  (http://www.consilium.europa.eu/en/press/press-releases/2017/07/11-conclusions-mid-term-review-
capital-markets-union-action-plan/) 

9 

 
 
 
                                                 
1.3

  Market context 

1.3.1

  A persistently low and concentrated SME IPO activity 

Despite  the  benefits  of  stock  exchange  listings,  European  public  markets  for  SMEs  are 
struggling  to  attract  issuers.  The  number  of  initial  public  offerings  on  SME-dedicated 
markets  steeply  declined  in  the  European  Union  in  the  wake  of  the  crisis,  and  did  not 
significantly  pick  up  since.  As  a  result,  Europe  is  producing  only  half  of  the  SME  initial 
public  offerings  that  it  generated  before  the  financial  crisis  (478  initial  public  offerings  on 
average per year in 2006-2007 vs. 218 between 2009 and 2017 on EU SME MTFs). Between 
2006  and  2007,  an  average  of  EUR  13.8  billion  was  raised  annually  on  European  SME-
dedicated  MTFs  through  initial  public  offerings.  This  amount  fell  to  EUR  2.55  billion  on 
average  from  2009  to  2017.  While  IPO  markets  continue  to  function  well  for  larger 
companies, they may have become less accessible to smaller companies26.  

Figure 3 – IPO values, number of IPOs, average capitalisation and average number of listed companies on 
European junior markets 

Source: Commission data on European SME-dedicated MTFs collected directly from securities exchanges 

Importantly,  one  MTF  –  AIM  in  the  UK  –  has  been 
responsible for the bulk of the activity between 2006 
and  2017  (74%  of  the  total  proceeds).  Although  this 
proportion has decreased over time, it still represented 
more  than  half  of  all  IPO  values  conducted  on  EU 
SME  markets  in  2016.  This  fact  highlights  a  second 
important issue in the European SME IPO landscape: 
the activity remains highly concentrated in the UK, 
leaving 
in 
comparison.  

other  markets 

virtually 

inactive 

26AFME, The shortage of Risk Capital for Europe's High Growth Businesses, 2017 

10 

 
 
 
                                                 
Source: Commission data on European SME-dedicated MTFs collected directly from securities exchanges 

In addition, the fact that 18 European SMEs carried out their initial public offerings in the US 
between  October  2012  and  March  2014,  raising  a  total  of  EUR  1,156  million  of  capital, 
further illustrates  the fact  that  EU IPO  markets may not  always suit the needs of  European 
SMEs27. 

1.3.2

  Underdeveloped SME bond markets 

The  situation  on  debt  markets  is  also  particularly  worrying.  As  highlighted  by  a  dedicated 
Commission Expert Group, bond markets remain largely untapped by European SMEs, 
despite the creation of specialised platforms in Europe with simpler, less costly processes and 
requirements28,29. This situation is clearly reflected in the low number of companies issuing 
bonds  on  SME-dedicated  markets:  out  of  the  approximately  35,000  companies  eligible  to 
issue mini-bonds in Italy30, only 222 companies did so from 2012 to 201631. Similarly, 800 
Spanish SMEs are believed to be eligible to issue bonds on the Spanish SME-dedicated debt 
market  (MARF)32,  while  there  have  been  only  41  five  issuers  of  debt  on  the  market  since 
201333. 

2

  PROBLEM DEFINITION 

To create viable public markets for small and mid-capitalisation companies, SMEs must be 
willing to issue securities (supply) and investors must be willing to invest in this asset class 
(demand)34.  Furthermore,  public  markets  for  SMEs  need  to  be  supported  by  healthy  local 
ecosystems  (i.e.  a  network  of  brokers,  equity  analysts,  credit  rating  agencies,  investors 
specialised  in  SMEs,  etc.)  that  help  smaller  firms  both  pre-  and  post-IPO,  connect  listed 
SMEs  with  investors,  and  that  (indirectly)  ensure  a  sufficient  level  of  liquidity.  All  these 
elements  are  also  influenced  by  the  way  regulations  have  been  designed.  In  this  regulatory 

27 Dealogic and AFME analysis, 2016; as the data do not explicitly identify SMEs but instead distinguish issuers based on 
IPO values (below EUR 100 million, below EUR 1 billion…), the 18 companies considered here are those having raised less 
than EUR 100 million at the time of IPO, which typically should only cover small and midcaps.  
28  "Improving  European  Corporate  Bond  Markets",  Report  from  the  Commission  Expert  Group  on  Corporate  Bonds, 
November 2017 
29 OECD, Opportunities and constraints of market-based financing for SMEs, September 2015 
30 Cerved Group, Is there a market for mini-bonds in Italy? A snapshot of unlisted companies, October 2013 
31 Background document on (Italian) mini-bonds - FeBAF-VOEB event on "New Financial Instruments: the Experience of 
Schuldscheindarlehen in Germany and the Comparison with Mini-Bonds in Italy", 2017 
32 Data from Gabinete de estudios economicos Axesor, July 2013 
33 Data collected by Commission services from European exchanges 
34 EuropeanIssuers, EVCA and FESE, EU IPO Report, March 2015 

11 

 
 
 
 
 
                                                 
perspective,  the  challenges  that  SME-dedicated  markets  are  currently  facing  can  be 
categorised into two groups: (i) on the supply side, issuers have to face high compliance costs 
to be able to list; (ii) on the demand side, insufficient liquidity can affect issuers, investors as 
well as market intermediaries. 

2.1

  What are the problems 

2.1.1

  Supply side: high compliance costs for listed SMEs 

Two  categories  of  costs  are  incurred  by  SMEs  when  tapping  public  markets:  (i)  the  direct 
costs  of  becoming  (at  the  Initial  Public  Offering  or  IBO35 stage)  and  remaining  publicly 
listed,  through  fees  paid  to  several  services  providers  (such  as  the  underwriting  banks, 
auditors,  legal  advisors,  communication  specialists…);  and  (ii)  the  indirect  ongoing 
compliance  costs  to  meet  regulatory  requirements.  While  making  a  decision  on  whether  or 
not  to  list,  companies  weigh  expected  benefits  against  the  costs.  If  costs  are  higher  than 
benefits or if alternative sources of financing propose a better ratio, companies will not seek a 
listing of their shares or an issuance of bonds on a public market36. The focus of this impact 
assessment will be on the indirect costs associated with requirements laid down in European 
legislation. 

Heavy  reporting  requirements  are  considered  an  indirect  cost  of  remaining  public 37 ,  as 
additional staff is needed to assist the issuer in complying with regulatory requirements. The 
problem  is  magnified  by  the  fact  that  EU  legislation  is  very  technical38,  that  SMEs  may 
therefore  not  have  the  expertise  or  experience  needed  to  understand  and  meet  their 
obligations  (giving  rise  to  compliance  issues),  and  may  not  be  prepared  to  obtain  external 
legal  advice  due  to  associated  costs39.  In  general,  SMEs  hold  the  view  that  fund-raising 
through capital markets imposes a large administrative burden, which is considered one of the 
main hurdles to going public. A study from the World Federation of Exchanges40 has asked 
listed  SMEs  to  compare  their  experience  of  listing  with  their  prior  expectations.  The  areas 
where listed SMEs' experience was most out of line with expectations were 'time and costs of 
meeting  listing  requirements',  'time  and  costs  of  reforming  the  corporate  governance 
structure'  and  'time  and  cost  of  aligning  financial  statements'.  Among  other  things,  the 
majority of unlisted SMEs mentioned that 'the ongoing cost of compliance was too high', 'the 
listing  requirement  entailed  changing  too  many  requirements  within  the  firm'  and  that  they 
were 'concerned about heavy and cumbersome requirements'. These responses confirm that 
SMEs  not  only  perceive  capital-raising  on  public  markets  as  burdensome,  costly  and  time 
consuming – a perception that may discourage them from listing – but actually experience it 
as  such.  High  compliance  costs  and  management  time  spent  to  comply  with  the  regulatory 
burden  can  also  lead  companies  listed  on  junior  markets  to  cancel  their  admission  to 
trading41.   

35 IBO stands for Initial Bond Offering 
36 EuropeanIssuers, EVCA and FESE, EU IPO Report 
37 OECD,  "Opportunities  and  limitations  of  public  equity  markets  for  SMEs”,  OECD  Journal:  Financial  Market  Trends, 
Vol. 2015/1, 2016 
38 EuropeanIssuers, EVCA and FESE, EU IPO Report, March 2015 
39 OICV, SME Financing through capital markets, July 2015 
40 World Federation of Exchanges, SME Financing and Equity Markets, 2017 
41 See  the  delisting  of  Norcon  from  AIM  UK  on  31  May  2016:  one  of  the  key  factors  mentioned  for  delisting  was  'the 
considerable  cost,  management  time  and  the  legal  and  regulatory  burden  associated  with  maintaining  the  Company's 
admission to trading on AIM', considered disproportionate compared to the benefits. See also DDD Group that delisted on 

12 

 
 
                                                 
 
The  inherent  small  size  of  SMEs  often  makes  compliance  costs  disproportionate42.  As  the 
costs  associated  with  some  requirements  are  largely  fixed,  economies  of  scale  imply  that  a 
disproportionately large burden is placed on smaller firms, either in terms of staff to mobilise 
or  actual  monetary  costs43.  In  2010,  the  total  ongoing  costs  of  remaining  listed  (direct  and 
indirect) in France were estimated to lie between EUR 150,000 to EUR 500,000 per year for 
equity  issuers  with  less  than  EUR  150  million  of  capitalization 44 .  One  UK  stakeholder 
mentioned that the direct and indirect costs of having shares admitted to trading on AIM (the 
London Stock Exchange SME Growth Market in the UK) are considered to be around EUR 
325,000 per year45. In the UK, complying with the Market Abuse Regulation would result in 
additional costs estimated at EUR 58,000 per year and per company listed on AIM46. In Italy, 
the  costs  due  to  application  of  the  Market  Abuse  Regulation  to  bond  issuers  on  EXTRA-
MOT-PRO (an SME-dedicated MTF specialised in bonds) are estimated at EUR 25,000 for 
the  first  year  and  between  EUR  5,000  and  EUR  10,000  per  year  for  ongoing  compliance. 
Some companies across the EU were also reported to have delisted because of the cost and 
compliance burden stemming from the Market Abuse Regulation 47. 

2.1.2

  Demand side: Insufficient liquidity on SME-dedicated markets 

SME markets and small cap companies traded on them tend to suffer from lower levels 
of  liquidity48 than  their  larger  counterparts49. As shown in the table below, the  turnover 
ratio50 of all the SME-dedicated MTFs is typically lower than the turnover of corresponding 
regulated  markets  in  the  same  Member  State51.  Some  SME-dedicated  MTFs  have  very  low 
liquidity, with a turnover ratio between 0 and 5%.  

Figure 4 – Comparison of selected alternative markets: turnover ratio 

First North (Nordics) 
EN.A (EL) 
ESM (IE) 
AIM (IT) 
NewConnect (PL) 
AeRO (RO) 
MAB (ES) 
AIM (UK) 

2009 
58% 
2% 

2007 
85% 
N/A 

2008 
60% 
1% 

2006 
113% 
N/A 
124%  126%  195%  133% 
2,4% 
N/A 
42% 
N/A 
N/A 
N/A 
18% 
N/A 
59% 
77% 

N/A 
36% 
N/A 
N/A 
62% 

N/A 
44% 
N/A 
N/A 
77% 

2010 
56% 
2% 
64% 
13% 
62% 
N/A 
10% 
60% 

2011 
56% 
1% 
4,6% 
7,6% 
40% 
N/A 
10% 
67% 

2012 
126% 
1% 
4,2% 
9,3% 
20% 
N/A 
10% 
78% 

2013 
84% 
1% 
2,9% 
17% 
14% 
N/A 
15% 
58% 

2014 
82% 
0% 
5,6% 
20% 
20% 
N/A 
123% 
77% 

2015 
58% 
0% 
7,9% 
30% 
31% 
2% 
17% 
58% 

2016 
53% 
2% 
5,7% 
11% 
23% 
5% 
5% 
57% 

2017 
60% 
2% 
13% 
47% 
24% 
3% 
4% 
72% 

Source: Commission data on European SME-dedicated MTFs collected directly from exchanges 

23  May  2016,  mentioning  the  costs  associated  with  trading  on  AIM  as  the  main  reason  for  delisting,  and  stating  that  the 
Company would have otherwise saved more than GBP 250,000 per year.   
42 Kaousar  Nassr,  Iota  and  Gert  Wehinger  ,  “Opportunities  and  limitations  of  public  equity  markets  for  SMEs”,  OECD 
Journal: Financial Market Trends, Vol. 2015/1, 2016 
43 C  Leuz  and  P  Wysocki,  Economic  consequence  of  Financial  Reporting  and  Disclosure  Regulation:  A  Review  and 
Suggestions for Future Research, Working paper, University of Chicago and MIT, 2008 
44 An EU-listing small Business Act, Report by Fabrice Demarigny, March 2010   
45 Note from the Quoted Companies Alliance, 3 June 2016 
46 Ongoing legal fees resulting from the MAR application is around EUR 15,000 per year. Regarding the insider list system 
costs, companies could incur one-time fee of EUR 4,500 for the setting up of the new system, with an added EUR 13,000 
annual fee for the licence to this system. Company would also need to employ a new member of administrative staff at least 
part-time,  which  adds  the  annual  costs  salary  of  approximately  at  EUR  30,000.  Source:  QCA  Letter  to  the  European 
Commission   
47 See the three companies Mydentist, Takko and Lincoln Financing as well as the delistings of bonds by larger US issuers 
on EU markets such as Microsoft Corporation and Freddie Mac   
48 According to Keynes (1930), 'a market is liquid if trades can quickly buy or sell large numbers of shares without large 
price effects'  
49 World Federation of Exchanges, SME Financing and Equity Markets, 2017 
50 Turnover ratio is the annual turnover value to the capitalisation of companies listed on the market.  
51 Association for Financial Markets in Europe (AFME), Equity Primary Market and Trading Report, Q4 2015 

13 

 
 
 
                                                                                                                                                        
Figure 5 – Comparison of selected regulated markets: turnover ratio 

Nasdaq OMX (Nordics) 
ATHEX (EL) 
Irish SE (IE) 
Borsa Italiana (IT) 
Warsaw SE (PL) 
Bucharest SE (RO) 
BME (ES) 
LSEG (UK) 

2007 

2008 

0 
20% 

0% 
36% 

0% 
63% 

2011 
89% 
0% 
42% 

2010 
88% 
0% 
23% 

2006 
2009 
132%  134%  135%  109% 

2017 
61% 
48% 
0 
27% 
13% 
154%  204%  185%  158%  163%  179%  138%  128%  153%  153%  114%  108% 
38% 
44% 
22% 
24% 
14% 
15% 
12% 
17% 
88% 
114%  135%  183% 
N/A 
N/A 
N/A 
N/A 

42% 
45% 
13% 
22% 
119%  117% 
N/A 
N/A 

36.% 
36% 
17% 
11% 
108%  134% 
N/A 
N/A 

2013 
64% 
0% 
66% 

2014 
64% 
25% 
59% 

2015 
68% 
45% 
44% 

2016 
64% 
51% 
50% 

2012 
69% 
0% 
40% 

42% 
17% 
87% 
N/A 

38% 
11% 
98% 
N/A 

41% 
15% 
93% 
N/A 

58% 
15% 
90% 
N/A 

Source: Commission data on European SME-dedicated MTFs collected directly from exchanges 

Low  levels  of  liquidity  act  as  one  of  the  most  important  deterrents  to  investments  in 
SME  financial  instruments,  and  especially  in  shares52. Investors (institutional and retail) 
overall prefer liquid stocks (and markets) for their investments53. A study has shown that both 
retail and institutional investors consider that more liquidity in SME stocks is the main factor 
that  would  increase  their  confidence  in  listed  SMEs 54 .  Without  liquidity,  professional 
investors face increased risks ('liquidity risk') and tend to shift their assets away from SMEs 
into larger capitalisation companies55. Liquidity remains the precondition for an exit from an 
investment. With insufficient liquidity, it might take several months for an investor to sell off 
their holdings in a company. When liquidity is constrained, professional investors cannot get 
the shares required to fulfil their portfolio requirements, deterring their participations in such 
markets56.  

Low  liquidity  on  SME-dedicated  markets  is  an  important  variable  for  issuers.  Low 
liquidity  increases  the  equity  cost  of  capital 57 and  increases  the  likelihood  that  an  initial 
public offering could be under-priced58 compared to the actual fundamentals of the company, 
as  investors  price  in  the  liquidity  risk.  In  addition,  lack  of  liquidity  may  be  an  important 
driver  of  delistings.  If  a  stock  is  not  liquid,  it  may  be  priced  at  a  discount,  which  implies 
lower  advantages  of  being  listed.  This  could  imply  that  companies  with  more  concentrated 
ownership  (less  free  float),  less  traded  stocks  and  operating  in  less  liquid  national  stock 
markets will be more inclined to go private.  

The lack of liquidity is also a source of concern for market intermediaries. A study has 
shown that market intermediaries consider a mechanism enhancing liquidity of SME stocks' 
to  be  the  most  important  factor  for  the  health  of  the  SME  ecosystem59.  Interestingly,  this 
result  holds  across  all  types  of  intermediaries,  as  financial  institutions  supplying  financial 
services to SMEs usually provide more than one service, several of which requiring market 
liquidity (such as underwriting, brokerage or market-making services)60. Liquidity is key in 
the business model of brokers61, especially on segments where trading volumes are thin, like 
on  SME  segments.  Evidence  suggests  that  revenues  from  the  fees  generated  by  smaller 

52 OECD,  "Opportunities  and  limitations  of  public  equity  markets  for  SMEs”,  OECD  Journal:  Financial  Market  Trends, 
Vol. 2015/1, 2016; For instance, a survey has shown that 74% of investors considered the lack of liquidity of SME shares as 
a barrier that impacts investor interest (CFA Institute, Issue brief: Investors and SME Funding, 2013).  
53 G. Wuyts, Stock Market Liquidity: Determinants and Implications, Tidjschrift voor Economie en Management, 2007 
54 World Federation of Exchanges, SME Financing and Equity Markets, 2017 
55 OECD, Opportunities and Constraints of Market-Based Financing for SMEs, September 2015 
56 OECD,  "Opportunities  and  limitations  of  public  equity  markets  for  SMEs”,  OECD  Journal:  Financial  Market  Trends, 
Vol. 2015/1, 2016 
57 G. Wuyts, Stock Market Liquidity: Determinants and Implications, Tidjschrift voor Economie en Management, 2007 
58 Ellul A. and Pagano M., IPO Underpricing and After-Market Liquidity, Review of Financial Studies, p.348-421 (2006). 
59 For instance, a provider of legal services should not necessarily care about liquidity 
60 World Federation of Exchanges, SME Financing and Equity Markets, 2017 
61 See annex 9 for more details on the business model of brokers 

14 

 
 
 
                                                 
trading  segments  are  insufficient  to  remunerate  brokers,  who  bear  high  fixed  costs  and  are 
often locally-based62. Due to this lack of liquidity, services providers are not incentivised to 
support  smaller  listed  companies  because  it  is  economically  less  attractive  for  them  to  do 
so63.  This  lack  of  profitability  potentially  creates  problems  in  ensuring  the  existence  of  a 
sufficiently vibrant and motivated ecosystem to support small and mid-caps. Such ecosystems 
consist  of  investment  banks  specialised  in  SMEs,  brokers,  market-makers  and  other  third 
party advisors specialised in SMEs. The erosion64 or disappearance65 of the local and regional 
ecosystems  in  Europe  is  cited  as  a  major  contributor  to  the  low  levels  of  initial  public 
offerings on SME markets66. 

2.2

  What are the problem drivers? 

While there are many factors driving SMEs' decision to go public and investors' decisions to 
invest  in  SME  financial  instruments,  this  impact  assessment  focuses  on  selected  drivers 
related to  specific barriers in the regulatory  framework. The other  'out-of-scope' drivers are 
described in Annex 5. 

2.2.1

  Administrative and regulatory burden on SME issuers stemming from the 

application of MAR and the Prospectus Regulation 

The  Market  Abuse  Regulation  has  extended  the  scope  of  its  obligations  to  issuers  whose 
financial  instruments  have  been  admitted  to  trading  on  an  MTF  (including  SME  Growth 
Markets). In doing so, the Market Abuse Regulation has created a 'one-size-fits-all' regulatory 
environment  by  making  all  its  requirements  applicable  (except  two  minor  alleviations 
discussed  below)  in  the  same  manner  to  all  issuers,  irrespective  of  their  size  or  the  trading 
venue  where  their  shares  or  bonds  are  admitted  to  trading.    In  the  context  of  the  Call  for 
Evidence on the EU regulatory framework for financial services, 'several respondents argued 
that the market abuse regime places a high burden on issuers listed on SME markets, which 
may ultimately result in less activity and thus reduced financing for SMEs'67. 

Some  MTF  issuers  notably  consider  their  obligation resulting from  the  Market  Abuse 
Regulation to notify managers' transactions as burdensome68. Notifications by managers 
of transactions carried out in relation to securities of companies they manage are informative 
for  price  formation  (market  signalling):  by  providing  the  market  with  this  notification, 
managers  indicate  to  investors  their  perception  of  the  issuers’  future  prospects 69 .  The 
obligation to disclose a manager’s transaction applies once these transactions have reached a 
cumulative  amount  of  EUR  5,000  within  a  calendar  year  (with  no  netting).  To  reduce  the 
number  of  declared  transactions  and  associated  costs,  a  national  competent  authority  may 
decide to increase the threshold to EUR 20,000, but  only  four  of them have  decided to use 

62 MiddleNext and La Financière de l'Echiquier, The 2016 European Small and Mid Cap Outlook, 2016 
63 World Federation of Exchanges, SME Financing and Equity Markets, 2017 
64 European Issuers, FESE and EVCA, EU IPO Report, 23 March 2015 
65 FESE, A blueprint for European Capital Markets, 2014 
66 The need to re-build ecosystems was highlighted in the 2013 report from the Economic and Financial Committee's High 
level Expert Group, which called on Member States to 'investigate (and report on) as a matter of urgency what is required in 
their market to (re)build an ecosystem comprised of dedicated analysts, brokers, market makers, ratings, etc…that can both 
advise and support issuers and investors, and foster liquidity of equity growth markets.'  
67 European Commission Staff Working Document, Call for Evidence - EU regulatory framework for financial services, 
SWD(2016) 359 final 
68 Feedback  received  during  workshops  organised  by  Commission  services  on  regulatory  barriers  to  SME  listing; Call  for 
evidence; Public consultation "Building a proportionate regulatory environment to support SME listing" 
69 ESME Report on the Market Abuse Directive, 2007 

15 

 
 
 
                                                 
this  option 70 .  Some  stakeholders  consider  that  this  threshold  is  too  low,  making  this 
requirement  not  only  burdensome  for  managers  and  issuers  but  also  poorly  informative  for 
the  market71.  The  persons  caught  by  the  managers'  transactions  regime  (either  the  Persons 
Discharging  Managerial  Responsibilities  –  PDMRs  -  or  the  Persons  Closely  Associated  to 
PDMRs - PCAs) shall notify the issuers within three working days as of the transaction date, 
while SME issuers are obliged to disclose those managers' dealings within the same three-day 
period. As the settlement of a transaction takes at least two working days and can lead to a 
late notification, the current three working-day rule may not allow issuers to have sufficient 
time to disclose the transactions to the market, while they face potential sanctions in case of 
non-compliance with this requirement72. This timeframe will still be particularly challenging 
when  the  issuer  is  seeking  legal  advice  about  whether  a  specific  transaction  should  be 
disclosed or not73.   

Another administrative burden stems from the obligation to justify the reasons why the 
disclosure of inside information has been delayed. The issuer can delay such disclosure in 
certain  cases  to  avoid  harming  its  legitimate  interests  and  provided  that  it  would  not  prove 
misleading  for  the  public.  However,  once  it  has  decided  to  delay  the  disclosure,  the  issuer 
must  inform  its  national  competent  authority  and  justify  the  delay.  The  written  explanation 
should  be  provided  in  all  circumstances  or  only  when  the  national  competent  authority 
requests  it  (but  only  seven  Member  States  have  chosen  this  second  option 74 ).  An 
implementing  regulation75 provides  that  companies  must  record  and  document  in  writing  a 
long  list  of  information  ('disclosure  record')76.  This  requirement  can  be  burdensome  for 
SMEs that already struggle with defining what constitutes inside information. In some cases, 
SMEs can also be tempted to disclose inside information earlier than they wanted (and thus 
harming  its  legitimate  interests)  to  avoid  time-consuming  justifications  to  the  national 
competent authority77.  

The  private  placement  of  SME  bonds  with  institutional  investors78 is  also  constrained 
by  the  Market  Abuse  Regulation  market  sounding  regime 79 .  The  Market  Abuse 

70 FI, FR, IT, NL 
71 Feedback received from stakeholders during technical workshops organised by the Commission on regulatory barriers to 
SME listing and  Public consultation on SME listing 
72 For an infringement of Article 19, NCAs have the power to impose a sanction of up to EUR 500,000 (Art. 30 MAR).  
73 Public consultation "Building a proportionate regulatory environment to support SME listing" 
74 BG, DK, EL, NL, AT, FI and UK 
75 Implementing Regulation (EU) 2016/1055 of 29 June 2016 
76 This includes among others the time and date when such information came to exist, when the decision was taken to delay 
its  disclosure,  the  identity  of  the  persons  who  adopted  the  decision  and  are  responsible  for  constantly  monitoring  the 
conditions of the delay, and the manner in which the prerequisite conditions for such delay were met. 
77  Feedback  received  from  stakeholders  during  technical  workshops  organised  by  Commission  services  on  regulatory 
barriers to SME listing 
78 There  are  several  markets  for  negotiated  privately  placed  bonds  in  the  EU.  Private  placement  transactions  of  debt 
instruments can sometimes take the form of listed bonds. This is the case notably in France, Spain and Italy. For instance, in 
2016, the Euro-PP market (essentially in France) recorded 68 deals for a total amount of EUR 4.5 billion. The number of 
listed  Euro-PP  transactions can vary  from  one year  to another and  in  general between  25  and  70%  of  the  transactions  are 
listed.  In  Italy,  the  Mini-bond  market  is  a  market  of  debt  instruments  especially  designed  for  unlisted  companies.  The 
number of mini-bonds issued in 2016 increased to 106 and for a total volume of EUR 3.57 billion. Most of those transactions 
were listed on the Extra-Mot Pro (an Italian MTF for corporate bonds and restricted to institutional investors). In Spain, EUR 
2.28  billion  was  raised  on  the  Mercado  Alternativo  de  Renta  Fija  in  2016,  a  MTF  which  targets  medium-sized  firms  and 
professional  investors  (Source:  BCG  and  Linklaters,  Study  on  Identifying  the  market  and  regulatory  Obstacles  to  the 
Development of Private Placements of Debt instruments in the EU, 2017, Background Document on mini-bonds, FeBAF-
VOEB event on 'New Financial Instruments: the Experience of Schuldscheindarlehen in Germany and the Comparison with 
mini-bonds in Italy', 2017)  

16 

 
 
                                                 
Regulation  provides  for  a  prescriptive  regime,  which  introduces  obligations  on  issuers  (or 
investment firms acting on their behalf) carrying out soundings as well as on investors who 
are  sounded  out.  The  heavy  obligations  imposed  have  a  deterring  effect  on  both  potential 
issuers and investors that might otherwise have been interested in entering into a negotiation 
process with the issuer to concluding such a transaction80. 

Furthermore,  the  Market  Abuse  Regulation  does  not  go  far  enough  in  differentiating 
requirements  for  SME  Growth  Market  issuers  compared  to  companies  listed  on 
regulated markets81. The Market Abuse Regulation has made only two limited concessions 
to  SME  Growth  Market  issuers.  First,  those  issuers  can  disclose  inside  information  on  the 
trading  venue's  website  (rather  on  their  own  website).  In  practice,  this concession has  been 
considered to be of limited value82, as SMEs can also be required to maintain a website for 
regulatory  or  other  commercial  purposes.  Second,  SME  Growth  Market  issuers  are  also 
exempted from maintaining 'insider lists' (i.e. a list of all persons who have access to inside 
information)  on  an  ongoing  basis,  as  long  as  the  issuer  takes  all  reasonable  steps  to  ensure 
that any person with access to inside information acknowledges the regulatory duties which 
follow and the issuer is able to provide the national competent authority, on request, with the 
insider  list.  This  exemption  does  not  amount  to  a  real  alleviation.  In  practice,  it  can  be 
difficult  to  draw  up  an  insider  list  ex-post  several  months  after  the  events  that  gave  rise  to 
inside information.  There is  also  still a need  for such  issuers to  have  adequate systems and 
procedures in place to produce an insider list if requested by the national competent authority. 
This may lead such issuers to establish costly internal systems or processes, which increase 
the administrative burden they are under. 

Finally, it  appears  that  very  few  companies  listed  on  SME-dedicated  markets  actually 
graduate  to  the  European  main  (regulated)  markets,  while  those  trading  venues  allow 
successful  companies  to  benefit  from  greater  liquidity  and  a  larger  investor  pool 83 . 
Stakeholders indicated that one regulatory impediment to such a graduation on main markets 
is  the  obligation  to  draft  a  full  prospectus  when  the  shares  are  admitted  to  trading  on  a 
regulated market84. 

Figure 6 – Companies moving from SME-dedicated markets to regulated markets 

Dritter 
Markt 
(AT) 

Euronext G  
(FR,BE, 
NL,PT) 

START 
(CZ) 

First 
North 
(Nordics) 

ESM 
(IE) 

AIM 
(IT) 

New 
Connect 
(PL) 

MAB 
(ES) 

Aktie 
Torget 
(SE) 

NGM 
(SE) 

AIM 
(UK) 

Total of listings from the 
SME-dedicated MTF to the 
regulated market 
Total number of listed 
companies since 2006 or the 
creation of the SME MTF 
% over total number of 
companies listed on market 

0 

4 

8 

276 

0 

1 

61 

3 

3 

62 

1 

6 

1 

74 

426 

32 

120 

646 

93 

258 

83 

2251 

0% 

3% 

0% 

14% 

9% 

3% 

10% 

1% 

2% 

1% 

3% 

Source: European Commission calculations based on data collected directly from European securities exchanges 

79  According  to  Article  11  of  MAR,  market  soundings  are  defined  as  a  communication  of  information,  prior  to  the 
announcement  of  a  transaction,  in  order  to  gauge  the  interest  of  potential  investors  in  a  possible  transaction  and  the 
conditions relating to it such as its potential size or pricing, to one or more potential investors.  
80 Public consultation, 2017 (AMAFI and ICMA's replies) 
81  Feedback  received  from  stakeholders  during  technical  workshops  organised  by  Commission  services  on  regulatory 
barriers to SME listing 
82 N. Moloney, EU Securities and Financial Markets Regulation, 2014 
83 World Bank Group, SME Exchanges in Emerging Market Economies, A Harwood, T Konidaris, 2015 
84 The Impact Assessment of the 2015 Prospectus Regulation (SWD(2015)255) estimates that the minimum cost of an equity 
prospectus range from EUR 1000 to EUR 3 million with an average of almost EUR 700,000. The maximum amount ranges 
between EUR 10 000 and EUR 4 million, averaging at EUR 1.3 million 

17 

 
 
 
                                                                                                                                                        
2.2.2

Inadequate definition of SME Growth Markets 

Europe Economics has identified around 40 potential candidates for the SME Growth Market 
label among the EU MTFs85. Among those 40 SME-dedicated MTFs, only three have been 
registered as SME Growth Markets so far86.  

As  mentioned  above,  an  SME  Growth  Market  is  currently  defined  as  an  MTF  on  which  at 
least  '50%  of  issuers  are  SMEs'.  SMEs  are  defined  by  Markets  in  Financial  Instruments 
Directive  II  as  companies  with  a  market  capitalisation  below  EUR  200  million.  This 
definition  does  not  prevent  SME-dedicated  MTFs  specialised  in  shares  to  register  as  SME 
Growth  Markets,  as  the  vast  majority  of  their  issuers  do  not  reach  this  EUR  200  million 
market capitalisation threshold87. However, as the market capitalisation threshold is set at a 
rather low level, this can  'adversely impact investor perception of the SME markets as they 
would  be  regarded  as  only  accommodating  micro-cap,  illiquid  companies"88.  Indeed  the 
definition  of  SMEs  included  in  Markets  in  Financial  Instruments  Directive  II  does  not 
correspond to those used in  indices or  by asset  managers specialised in small  caps89. Some 
European  regulations  already  grant  regulatory  incentives  to  companies  that  have  a  larger 
market capitalisation than the MiFID II SME definition90. Finally, it appears that companies 
with  a  higher  market  capitalisation  than  EUR  200  million  can  also  suffer  from  liquidity 
issues, thus attracting lower investor interest and making the listing less attractive. The figure 
below  shows  that  liquidity  really  kicks  in  for  companies  listed  on  AIM,  when  their  market 
capitalisation exceeds GBP 1 billion.  

Figure 7 – Average annual value of shares traded by market cap band, AIM 

85 Europe  Economics,  Data  Gathering  and  Cost  analysis  on  Draft  Technical  Standards  Relating  to  the  Market  Abuse 
Regulation, 2015 
86 AIM (UK), AIM Italy (IT) and NEX (UK) 
87 Data provided by EU exchanges show that issuers listed on SME MTFs have a very low market capitalisation, with many 
markets having an average market cap below EUR 10 or even EUR 5 million (see Figure 11 and annex 13) 
88 ESMA  Securities  and  Markets  Stakeholder  Group,  Report  on  Helping  Small  and  Medium  Sized  Companies  Access 
Funding, 12 October 2012 
89 The European MSCI (Morgan Stanley Capital International) indices are sub-divided into 4 market capitalisation sections:  
large caps (with a median capitalisation of EUR 10.8 billion), midcaps (EUR 6.4 billion), small caps (EUR 1 billion) and 
micro caps (EUR 100 million). EFAMA (the EU fund & asset management association) runs a fund classification system, 
which  is  used  by  many  EU  fund  managers  to  describe  the  nature  of  their  funds  e.g.  Small-Cap  funds.  A  fund  will  be 
considered  a  small-cap  fund  if  at  least  80%  of  its  assets  are  invested  in  small  caps  defined  as  companies  with  a  market 
capitalisation below EUR 3 billion.  
90 For  instance,  the  alleviated  'EU  Growth  Prospectus',  created  by  the  revised  Prospectus  Regulation,  is  available (beyond 
SMEs) to companies listed on an SME Growth Market with a market capitalisation up to EUR 500 million. The European 
Long-Term  Investment  Funds  Regulation  allows  those  funds  to  invest  into  companies  listed  on  a  MTF  (including  SME 
Growth Markets) with a market capitalisation up to EUR 500 million.   

18 

 
 
 
 
                                                 
Another regulatory issue arises from the fact that the level 1 of MiFID II only refers to equity 
issuers. To determine whether an SME Growth Market has at least 50% of SME issuers, the 
level 2 of MiFID II91 provides for a complementary approach to capture SME debt issuers on 
SME Growth Markets. The level 2 states that issuers with no equity instrument traded on any 
trading  venue  shall  be  deemed  an  SME  provided  that,  according  to  its  last  annual  or 
consolidated  accounts,  it  meets  at  least  two  of  the  following  three  criteria:  (i)  an  average 
number of employees during the financial year of less than 250; (ii) a total balance sheet not 
exceeding  EUR  43  million  and  (iii)  an  annual  net  turnover  not  exceeding  EUR  50  million. 
This definition refers to the EU 2003 Recommendation defining an SME92, which is not fully 
adapted to companies willing to issue bonds on SME-dedicated MTFs. As the OECD puts it, 
the SME bond market is 'suited mostly to the upper segment of the SME size spectrum'93. The 
typical issuance size ranges between EUR 20 and 80 million on the Mercado Alternativo de 
Renta Fija in Spain94 and EUR 30 million on Extra-MOT Pro95 in Italy. Therefore, after the 
issuance, some SME bond issuers may not meet the balance sheet threshold (especially when 
they return to the market for follow-up bond issuances). Second, in order to repay a debt of 
such scale, SME bond issuers need to  have stable cash-flows with  a turnover  prospectively 
higher than EUR 50 million96.  

If the definition of SME bond-only issuers is not well-calibrated, the SME-dedicated MTFs 
specialised in bond issuances and those that allow both equity and bond issuances by SMEs97 
may  face  challenges  in  registering  as  SME  Growth  Markets.  In  turn,  if  the  SME  Growth 
Market framework is  not  used  by  market operators, their issuers will not  be able to  benefit 
from regulatory alleviations, thus increasing their compliance burden. 

Beyond the SME non-equity issuer definition, another requirement may hinder the take-up of 
the SME Growth Market concept. The level 2 of MiFID II also imposes periodic disclosure 
requirements  on  SME  Growth  Market  issuers,  by  requiring  half-yearly  and  annual  reports. 
Financial  reporting  provided  on  a  half-yearly  basis  is  usually  welcomed  by  investors  and 
contributes  to  attracting  interest  in  the  company.  However,  some  market  participants  have 
indicated  that  the  publication  of  such  half-yearly  information  can  also  represent  a  time-
consuming  and  costly  obligation  for  SMEs.  The  absence  of  flexibility  left  to  the  market 
operators as regards the possibility to require or not a half-yearly report can discourage some 
MTFs from seeking a registration as an SME Growth Market, because they cannot tailor their 
listing rules to local conditions98.     

Finally,  the  take-up  of  the  SME  Growth  Market  'brand'  is  also  constrained  by  the  fact  that 
only  few alleviations  or benefits are currently foreseen in  the EU legislation for the issuers 

91 Art. 77 of the Commission Delegated Regulation (EU) 2017/565 
92 Art. 2 of the Commission Recommendation C(2003) 1422 (2003/361/EC) of 6 May 2003 defines Small and Medium-sized 
Enterprises (SMEs) as “enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding 
EUR 50 million, and/or an annual balance sheet total not exceeding EUR 43 million.” 
93 OECD, Opportunities and Constraints of Market-Based Financing for SMEs, September 2015 
94 Pablo Guijarro and Pablo Mañueco, MARF: Perspectives and risks for Spain´s new alternative fixed income market 
95  AFME,  Raising  Finance  for  Europe's  Small  &  medium-sized  businesses,  2015);  Response  of  LSEG  to  the  Public 
consultation on SME Listing: 70% of issuers on EXTRA-MOT Pro in Italy raise an amount below EUR 70 million.  
96 In the public consultation, the Spanish stock exchange (BME) indicated that the typical issue size on MARF is between 
EUR  20  -80  million. The  issuers have  a  typical a  balance  sheet ranging  between  EUR  60  and  100  million and  a  turnover 
around EUR 200 million.  
97 Such as Euronext Growth in FR, BE and PT and First North in SE, DK, FI, EE, LA, LV.   
98 Several MTFs do not require half-yearly reports for equity issuers (such as Dritter Markt, BSSE MTF). Other MTFs do 
not require such reports for non-equity issuers (such as Euronext Growth, Extra-MOT Pro or MARF).   

19 

 
 
   
                                                 
listed  on  this  new  type  of  trading  venues  (See  Annex  14).  Some  market  operators  and 
stakeholders99 consider that the legal framework applying to SME Growth Markets does not 
differentiate them much from MTFs (in terms of regulatory benefits) or regulated markets (in 
terms of alleviations), making the concept insufficiently attractive.     

2.2.3

  Lack of schemes (mechanisms) to promote trading and liquidity on SME 

Growth Markets  

The  limited  liquidity  on  SME  equity  markets  can  be  explained  by  a  number  of  factors100. 
While SMEs tend to overlook the importance of liquidity, investors favour mechanisms that 
promote trading of SME stocks101.   

There  are  different  mechanisms  through  which  liquidity  can  usually  be  enhanced.  Market-
making  (under  a  contract  with  a  trading  venue)  is  probably  the  most  traditional  system102. 
Some  market  operators  have  encouraged  the  development  of  market-making  (by  putting  in 
place some attractive fee trading schemes in return for minimum requirements to build deeper 
markets).  The  remuneration  of  the  market-maker  typically  comes  from  the  spread  (the 
difference between buy and sell prices). However, these types of arrangements also rely on 
the  existence  of  market-makers  that  are  willing  to  commit  capital  and  run  a  market  risk. 
Market-making  activities  would  currently  be  challenged  by  both  regulatory  reforms103 and 
new technology developments104. 

Another mechanism is the liquidity provision contract, which 'consists in an issuer entering 
into an agreement with a financial intermediary that is entrusted with the task of enhancing 
the liquidity of the issuer’s financial instruments'. Liquidity providers play the same role as 
market-makers but they do not act with their own account. Several studies show that liquidity 
contracts  can  improve  liquidity,  that  this  improvement  is  particularly  significant  for  less 
liquid  shares  and  that  they  help  reduce  liquidity  risk105.  When  SME  issuers  are  allowed  to 
enter into a liquidity contract, be it market making or liquidity provision, they seem to largely 
use this possibility106. However, in order to be allowed by a competent authority, the liquidity 

99 One market operator has for instance indicated that the SME GM regime did not offer sufficient benefits at this time to 
merit  registration.  Another  Market  operator  also  indicated  that  quantifiable  benefits  for  issuers  and  investors,  legal  and 
administrative facilities offered by the SME GM regime were rather light (Source: Data from securities-exchanges received 
by COM). See also: Lucas Enriques,  'What  should  qualify  as  a  'SME  Growth  Market?', 2018 'This new label, reserved to 
multilateral trading facilities in which more than half of issuers qualify as SMEs, has not so far delivered much in terms of 
alleviation of regulatory burdens.  
100  It  has  been  argued  that  the  fragmentation  of  the  trading  landscape  induced  by  MiFID,  has  resulted  in  increased 
competition and pressures on the business model of trading venues, encouraging some of them to focus on most profitable 
segments such as blue-chips trading at the expense of other less profitable segments, such as SMEs. Technological changes, 
such as the entry of high frequency traders, tend to reinforce the attractiveness of blue-chips at the expense of SMEs in terms 
of trading. 
101 World Federation of Exchanges, SME Financing and Equity Market, 2017 
102 ESMA Opinion on an AMP on liquidity contracts notified by the CNMV, December 2016 
103 OECD, Opportunities and Constraints of Market-based financing for SMEs, September 2015 
104 Technology developments (such as the emergence of high frequency trading) and other low trading techniques have also 
curbed the economic incentives for market-making in the most liquid stock. Market-making in liquid shares is also necessary 
to  subsidise  and  sustain  this  activity  for  small  and  illiquid  shares  (OECD,  Opportunities  and  limitations  of  public  equity 
markets for SMEs, 2016).    
105 Nimalendran and Petrella, 'Do thinly-traded stocks benefit from specialist intervention', Journal of Banking and Finance, 
2003;  Venkataraman  and  Waisburd,  The  value  of  the  designated  market  maker,  Journal  of  Financial  and  Quantitative 
Analysis, 2007; Anand, Tanggaard, and Weaver, Paying for market quality, Journal of Financial and Quantitative Analysis, 
2009;  Menkveld  and  Wang,  How  do  designated  market  makers  create  value  for  small-cap  stocks,  Jounal  of  Financial 
Markets, 2013; H. Bessembinder, J. Hao, K. Zheng, Liquidity Provision Contract and Market Quality', 2017 
106 In 2015, 116 out of 175 companies (i.e. 66%) listed on Alternext (that became Euronext Growth) had a liquidity contract. 
In 2017, all the issuers (88 companies) have a liquidity provision contract.  

20 

 
 
                                                 
provision  practice  must  be  recognised  as  an  accepted  market  practice  (AMP)  under  the 
Market  Abuse  Regulation.  For  an  accepted  market  practice  to  be  established  a  national 
competent  authority  must  notify  the  European  Securities  and  Markets  Authority  and  other 
national regulators of its intention, and the European Securities and Markets Authority must 
issue an opinion that (i) assesses the compatibility of the accepted market practice with the 
Market  Abuse  Regulation  and  the  related  regulatory  technical  standard  on  accepted  market 
practices,  and  (ii)  considers  whether  the  accepted  market  practice  would  threaten  market 
confidence in the European financial markets. For the time being, only four Member States107 
authorise liquidity provision contracts. This means that in 24 Member States, SME issuers do 
not have the possibility to enter into a liquidity contract, but have to rely on market makers 
(provided they exist).  

Finally, another technique consists in requiring a minimum free float (i.e. a minimum amount 
of capital in the public's hands and that can be freely traded) when an SME seeks to list its 
shares  on  an  SME-dedicated  market.  The  relative  low  volume  of  shares  traded  on  SME-
dedicated markets is often attributed to the small sizes and limited free float that small caps 
regularly offer108. It is likely that there will be a much smaller percentage of the shares of an 
SME  in  public  hands,  as  the  founders  of  the  company  will  probably  want  to  hold  on  to  a 
significant stake in the ownership of the company109. The Markets in Financial Instruments 
Directive II does not prescribe any free float or minimum capitalisation requirement when a 
company seeks the admission of its shares to trading on an SME Growth Market. Some SME-
dedicated MTFs110 have no requirement in terms of free float or initial minimum number of 
shareholders.  Other trading venues require a minimum number of shareholders (from 50 to 
300) or a threshold varying from 10 to 20% of the shares (see Annex 7). Finally, most of the 
SME MTFs do not set a minimum capitalisation threshold. Given this absence of free float at 
the initial public offering stage, liquidity in the secondary market is insufficiently stimulated, 
carrying the risk of reduced capitalisation (to reflect liquidity risk) and higher capital costs on 
these markets.   

2.2.4

  Out-of-scope drivers 

Beyond  the  drivers  listed  above,  the  demand  for  SME  financial  instruments  is  also 
constrained by additional factors, such as the lack of visibility of SMEs towards institutional 
and foreign investors, or the tax treatment of investments in the various Member States. The 
supply of SME financial instruments is also hindered by SMEs' lack of business  education. 
These  and  other  out-of-scope  drivers  are  not  addressed in  the  current  initiative  focusing  on 
targeted technical amendments, but are being considered in the wider plan to facilitate SME 
access to public markets (see section on policy context, i.e. CMU). For more details on out-
of-scope drivers, please refer to annex 5. 

2.3

Consequences: less capital raised by SMEs on public markets 

SMEs will opt in favour of (or against) a public listing of their shares/bonds by weighing the 
costs  and  benefits  of  such  a  decision.  Although  it  would  be  exaggerated  to  claim  that  low 
SME  listing  levels  are  the  direct  consequence  of  the  regulatory  issues  described  above,  the 

107 ESMA has issued a positive opinion on the SP and PT AMPs; FR and IT are working on their notifications. 
108 OECD,  "Opportunities and  limitations  of  public  equity  markets  for  SMEs”,  OECD  Journal:  Financial  Market  Trends, 
Vol. 2015/1, 2016 
109 City of London, the City's Role in providing for the Public Equity Financing of UK SMEs, March 2010, p.73 
110 Dritter Markt (AT), START (CZ), ESM (IE), the MTF operated by the BSSE and AIM (UK)  

21 

 
 
 
                                                 
latter  do contribute to  reducing  the  relative  attractiveness  of  public  markets  for  SMEs:  
they  increase  the  regulatory  burden imposed  on  SMEs  when  listing  on  public  markets,  and 
they limit the liquidity of listed SMEs.  

The  regulatory  barriers  considered  in  this  impact  assessment  are  part  of  a  wider  problem 
preventing  SMEs  from  accessing  the  advantages  of  public  issuances  of  shares  and  bonds. 
Concerning public equity markets, one of the main advantages lies in the ability for SMEs to 
raise permanent risk capital, i.e. capital that does not have to be paid back to investors within 
a given time limit111. In addition to serving as a direct source for financing new investments, 
listed  shares  also  provide  the  corporation  with  its  own  currency,  which  may  be  used  to 
finance  acquisitions112.  Concerning  bond  markets,  the  main  advantages  for  companies  stem 
from the flexibility of the instrument (the terms of the issuance can be fully customised to fit 
a  company’s  needs)  and  its  agility  (bond  markets  can  offer  quicker  access  and 
implementation than bank or equity funding)113.  

In addition, limited access to public markets further reduces SMEs' ability to raise funding by 
preventing  them  from  resorting  to  secondary  raisings.  Going  public  for  a  company  is  not 
only  a  one-off  opportunity  to  raise  capital,  but  offers  the  possibility,  for  both  equity  and 
bonds,  to  make  subsequent  issuances  over  time  and  raise  money  again  from  its  share-  and 
bondholders. The amount of equity raised through secondary or follow-on offerings is by no 
means  marginal  or  negligible.  Such  offerings  can  be  made  several  years  after  the  initial 
public offering, in order to finance, for example, a new phase of expansion. The figure below 
illustrates  the  total  public  equity  financing  of  growth  companies  with  an  initial  public 
offering  of  less  than  USD  100  million  in  advanced  economies.  In  every  year  shown  in  the 
figure, equity proceeds through secondary public offerings of companies exceed initial public 
offerings proceeds114. 

Figure 8 – Initial Public Offerings and Secondary Public Offerings by Growth Companies in Advanced 
economies (Billions, USD, 2014)  

Moreover,  public equity  and  debt  markets  enable  SMEs  to  raise  large  amounts  more  easily 
than they could through other means. Eventually, going public could also bring SMEs other 

 Source: OECD 

111 European Issuers, EVCA and FESE, EU IPO Report by the European IPO Task Force, March 2015 
112 OECD, Growth companies, Access to Capital Markets and Corporate Governance,  2015 
113 Analysis  of  European  Corporate  Bond  Markets,  Analytical  report  supporting  the  main  report  from  the  Commission 
Expert Group, November 2017, p.7 
114 OECD, Growth companies, Access to Capital Markets and Corporate Governance, 2015 

22 

 
 
                                               
                                                 
more  intangible  benefits,  such  as  increased  visibility  and  brand  recognition  for  potential 
suppliers and customers115.  

Reduced SME access to public equity and bond markets also results in limited opportunities 
for European companies to diversify their sources of funding and reduce their overreliance on 
bank loans. This is all the more relevant as studies have shown that the development of public 
equity markets may also foster SME access to the bond market, by increasing the availability 
of,  and  improve  conditions  for,  subsequent  debt  financing116.  A  study  from  the  OECD  has 
notably  found  a  strong  positive  relationship  between  a  company's  public  listing  and  its 
issuing  of  corporate  bonds117.  A  number  of  explanations  have  been  offered  to  explain  why 
being listed could help companies access the corporate bond market118,119. There is also 
evidence to suggest that the same positive relationship holds for listing, bank credits and 
syndicated loans120. 

In addition to the complementarity between equity and bond financing, more dynamic public 
equity  markets  can  also  foster  the  development  of  private  equity  and  venture  capital 
financing.  Healthy  public  equity  markets  can  stimulate  private  equity  and  venture 
capital  activity  by  providing  smooth  exit  opportunities121.  However,  the  European  SME-
dedicated  markets  do  not  currently  provide  a  stable  exit  mechanism  for  venture  capitalists 
and private equity funds122. Similarly, public equity markets for SMEs could also stimulate 
equity crowdfunding investments. However, at present, there is no real secondary market for 
crowdfunding  exits 123 .  As  a  consequence,  a  limited  SME  access  to  public  markets  has 
repercussions not only on capital-raising through IPOs, but throughout the funding escalator 
of companies (see annex 8 for more details). 

2.4

  Wider consequences 

Lower  capital  raising  activity  by  SMEs  on  public  markets  can  translate  into  significant 
missed opportunities for the European economy, in terms of economic growth, job creation 
and innovation. A significant amount of research has documented the links between vibrant 
public  markets  and  economic  growth 124.  Ensuring  the  development  of  SME-dedicated 

115 FESE, European Issuers, Guide to Going Public, 2015 
116 OECD,  "Opportunities and  limitations  of  public  equity  markets  for  SMEs”,  OECD  Journal:  Financial  Market  Trends, 
Vol. 2015/1, 2016 
117 OECD, Growth companies, Access to Capital Markets and Corporate Governance, 2015 
118 A. Eisele, E. Nowak, (Non-Bank) Financing of SMEs in Light of Crisis and New Regulation – Do Innovations in Market 
Financing have a real Impact?, 2016 
119 Faulkender M. and M.A. Petersen, "Does the Source of Capital affect Capital Structure?",  Review of Financial Studies, 
Vol.  19,  n°1,  2006.  First,  as  public  companies  already  publish  their  financial  statements  in  accordance  with  regulatory 
requirements,  the  reproduction  of  these  statements  for  the  bond  prospectus  and  the  following  periodic  disclosure  do  not 
constitute an additional cost. Likewise, management’s prior experience with public securities offering is likely to reduce the 
preparation  time  to  offer  bonds.  Moreover,  listed  companies  are  typically  subject  to  stricter  corporate  governance 
requirements, which, in the eyes of investors, make them less prone to the classical debt-related moral hazard. Last, the fact 
that the company’s shares are already publicly traded makes it less costly for underwriters to get investor attention.  
120 Pagano  M.,  Panetta  F.  and  Zingales  L.,  'Why  do  Companies  Go  Public?  An  Empirical  Analysis',  Journal  of  Finance, 
Vol.53, N. 1; Saunders A. and Steffen S., 'The Costs of Being Private: Evidence from the Loan Market', Review of Financial 
Studies, Vol. 24, n°12 
121 OECD,  "Opportunities  and  limitations  of  public  equity  markets  for  SMEs”,  OECD  Journal:  Financial  Market  Trends, 
Vol. 2015/1, 2016 
122 InvestEurope, 2016 European Private Equity Activity – See annex 8 for more details 
123 AFME, The Shortage of Risk Capital for Europe’s High Growth Businesses, 2017 
124 See for instance “Stock Markets, Banks and Economic Growth”, Ross Levine and Sara Zervos, The American Economic 
Review, June 1998,   p.554; "Opportunities and limitations of public equity markets for SMEs", Kaousar Nassr, Iota and Gert 
Wehinger (), OECD Journal: Financial Market Trends, Vol. 2015/1, 2016p.55; "Capital Market Imperfections, High-Tech 
Investment, and New Equity Financing", R. Carpenter and B. Petersen, The Economic Journal, 112 (February), 2012, F56 

23 

 
 
                                                 
public  markets is  key  in  fostering  growth,  as  they  appear  most  suited  to  the  needs  of  high-
growth,  innovative  SMEs,  which  would  otherwise  struggle  to  find  adequate  sources  of 
funding125,126. Data showed that junior trading venues can significantly boost the activity of 
fast-growing  SMEs,  as  companies  choosing  to  list  on  an  SME-dedicated  MTF  have  shown 
very significant growth rates in their post-IPO phase127.  

Similarly, as underdeveloped public markets do not enable high-growth companies to grow 
and  reach  their  full  potential,  they  also  prevent  them  from  recruiting  and  creating  jobs. 
Studies have highlighted that job creations by SMEs tend to accelerate after the initial public 
offerings128.  

Eventually, underdeveloped SME-dedicated public markets prevent fast-growing firms from 
exploiting their innovation potential129. As explained in a study on the economic impact of 
the  London  Stock  Exchange's  junior  market  AIM,  equity  capital  is  most  suitable  for 
technology firms and fast-growing companies needing to make upfront investments with no 
immediate  or  steady  revenues.  If  such  companies  do  not  have  access  to  funding  under 
appropriate conditions such as those offered by public equity markets, they are less likely to 
invest in research and innovate130. 

125 AFME Paper, Raising finance for Europe's small and medium-sized businesses, p.6, p.20 
126 World Bank Policy Research Working paper 3892, April 2006, p.3 
127 The  annual  turnover  of  companies  listed  on  NASDAQ  OMX's  junior  market  First  North  grew  by  25%  per  year  on 
average  over  the  2006-2012  period,  and  by  22.6%  in  2014.  In  comparison,  the  average  turnover  increase  for  non-listed 
companies  was  of  10%  per  year  during  the  2006-2012  period,  and  of  7.6%  in  2014.  Similarly,  companies  listed  on  the 
London Stock Exchange Group's SME-dedicated market AIM have had an average turnover growth of almost 45% in the 
first year immediately after listing, followed by an average yearly turnover growth between 20% and 30% in the second to 
fifth year after initial listing. See Capital Markets Union: The Road to Sustainable Growth in Europe, Nasdaq publication, 
2016, p.9-10; Grand Thornton, Economic Impact of AIM, April 2015, p.5 
128 Companies listed on London Stock Exchange’s junior market have seen their employment grow on average by 35% in the 
first  year  immediately  after  listing,  followed  by  an  average  yearly  employment  growth  of  20%  in  the  second  year,  and 
around 15% in the third to fifth after listing. Companies listed on Nasdaq First North saw their employment grow by 17.3% 
annually during the period 2006-2012 and by 4.7% in 2014. By comparison, non-listed companies saw an average annual 
increase  in  their  employment of  5%  over the 2006-2012  period,  and  of  2.7%  in  2014. This  trend  is  even  more visible  for 
smaller businesses, as companies with a turnover below GBP 5 million grew by more than 100% in employment in their first 
year post-admission on AIM. See Grand Thornton, Economic Impact of AIM, April 2015, p.5-6; Capital Markets Union: The 
Road to Sustainable Growth in Europe, Nasdaq publication, 2016, p.9-10 
129 OECD, Opportunities and constraints of market-based financing for SMEs, September 2015 
130 Grant Thornton, Economic Impact of AIM, April 2015, p.5-7; the study moreover illustrated the role of the UK's SME-
dedicated market in spurring innovation by highlighting the correlation between the location of AIM companies in the UK 
and areas with high levels of UK patents granted. 

24 

 
 
 
 
                                                 
Figure 9 –  Problem tree 

2.5

  How will the problem evolve? 

If  no  action  is  taken,  existing  market  and  regulatory  failures  would  remain,  SME  access  to 
public capital markets would be impeded, and small companies would continue to be largely 
dependent on bank financing. Market developments, such as the emergence of Fintech in the 
financial  services  industry,  is  not  expected  to  substantially  improve  the  situation  regarding 
the particular problems at hand. What is more, in certain areas further deterioration is likely. 
Considering that the majority of the European SME initial public offering activity has been 
carried out in the UK for the past twelve years (see section on Market context), the departure 
of  the  UK  from  the  European  Unionis  expected  to  reduce  the  opportunities  for  growth 
companies in continental Europe to list and raise capital on European public markets. 

It should also be kept in mind that low activity on SME MTFs has repercussions on the whole 
funding  escalator:  in  the  longer  run,  less  developed  junior  markets  also  means  less  exit 
opportunities  for  investors  at  the  Venture  Capital  and  Private  Equity  stage,  and  less 
companies able to move on to the regulated market (see Annex 8 for more details).  

In  this  context,  action  needs  to  be  taken  swiftly.  The  work  conducted  in  this  impact 
assessment  is  all  the  more  urgent  as  it  aims  to  address  issues  that  have  been  repeatedly 
highlighted  by  stakeholders  over  the  past  four  years  as  holding  back  SME  access  to  public 
markets (see annex 2 on stakeholder consultation for more details). In the public consultation 
on  “Building  a  proportionate  regulatory  environment  to  support  SME  listing”,  high 
compliance costs were rated the highest by respondents to explain the low number of SME 
initial  public  offerings.  Although  the  regulatory  impediments  presented  in  the  previous 
sections  do  not  explain  on  their  own  the  low  levels  of  SME  IPO  activity  in  the  European 
Union, they further dis-incentivise smaller companies to raise capital on public markets and 
exacerbate  unfavourable  market  conditions.  These  detrimental  impacts  are  unlikely  to 

25 

 
 
 
decrease in magnitude without further regulatory changes. So far, they have instead increased 
with  the  entry  into  application  of  the  Market  Abuse  Regulation  in  2016,  which  imposed 
stricter requirements to all issuers regardless of their size. Being a regulation, it also left little 
flexibility to Member States to adapt the rules. 

It is also important to note that waiting longer before taking action would be highly unlikely 
to bring further insight. As currently framed in MiFID II, the  SME Growth Market concept 
remains  an  “empty  shell”  with  only  little  difference  compared  to  the  general  MTF 
framework. As a consequence, a significant number of market operators have highlighted that 
they  saw  limited  benefits  to  registering  their  MTFs  as  SME  Growth  Markets.  In  some 
instances,  they  even  described  the  current  framework  as  unfit  for  purpose  (especially  for 
debt-only issuers). In this context, the resolution of the European Parliament, which called on 
making  “active  use  of  the  SME  Growth  Market  category  in  future  financial  services 
regulation”, should be taken up. 

3

  WHY SHOULD THE EU ACT? 

3.1

Legal basis 

The legal basis of the Market Abuse Regulation and the Prospectus Regulation (PR) is Article 
114  of  the  Treaty  on  the  Functioning  of  the  European  Union  (TFEU)  which  confers  to  the 
European  institutions  the  competence  to  lay  down  appropriate  provisions  that  have  as  their 
objective  the  establishment  and  functioning  of  the  single  market.  The  legal  basis  of  the 
Markets in Financial Instruments Directive II is Article 53(1)131. Under Article 4 of TFEU, 
EU action for completing the internal market has to be appraised in light of the subsidiarity 
principle set out in Article 5(3) of the Treaty on European Union. According to the principle 
of  subsidiarity,  action  on  European  level  should  be  taken  only  when  the  objectives  of  the 
proposed  action  cannot  be  achieved  sufficiently  by  Member  States  alone  and  thus  mandate 
action at European level.  

3.2

Subsidiarity: Necessity of action of the European Union 

It has to be assessed whether the issues at stake have transnational aspects and whether the 
objectives of the proposed actions cannot be sufficiently achieved by Member States in the 
framework  of  their  national  constitutional  system  (the  so-called  'necessity  test').  In  this 
regard,  it  should  be  noted  that  even  if  they  are  more  local  in  nature  compared  to  regulated 
markets,  SME-dedicated  MTFs  (and  potential  SME  Growth  markets)  have  a  clear  cross-
border dimension, in terms of investors who invest outside their Member States of origin (see 
Annex 7) as well as in terms of issuers that often list their shares or bonds on a trading venue 
located in another Member State132.   

The first objective of this initiative is to remove undue administrative burden and ease SME  
access to  public  markets  for  shares  and  bonds,  in  order  to  diversify  their  sources  of  capital 

131 Directives designed to coordinate Member States' rules on the taking up and pursuit of activities as self-employed persons 
and the provision of services 
132 In 2017, out of 209 issuers listed on Euronext Growth, 14 are foreign issuers (6.7% of the total). On NewConnect, out of 
406 issuers listed on NewConnect in Poland, 9 were not Polish companies (2.2%). Out of 1107 companies listed on AIM UK 
in 2012, 213 were not UK companies (19.1%).      

26 

 
 
 
 
 
 
                                                 
from anywhere within the  European Union. The second objective consists in increasing the 
liquidity in financial instruments issued by SME Growth Market issuers, especially shares. 

Administrative burden placed on SMEs results from the application of MiFID II, the Market 
Abuse Regulation and Prospectus Regulation. The latter two items of legislation have direct 
binding  legal  force  on  all  Member  States.  Those  rulebooks  leave  almost  no  flexibility  for 
Member States to adapt the rules to local conditions or to the size of issuers or investments 
firms.  Likewise,  MiFID  II  does  not  provide  Member  States  with  sufficient  flexibility  to 
address the problems identified. As such, the problems arising from those provisions can only 
be  effectively  addressed  via  legislative  amendments  tabled  at  the  European  level 133.  The 
possible alternatives, i.e. non-legislative action at Union level (e.g. guidelines by ESMA, and 
action at Member State level) could not sufficiently and effectively achieve the objective as 
they could not amend the provisions of the Regulations. Therefore, any improvement of these 
rules  to  make  the  EU  framework  for  SME  Growth  Markets  issuers  more  proportionate 
requires a legislative action at EU level.  

The liquidity of SME shares on the MTFs that could register as SME Growth Markets is also 
hindered  by  regulatory  shortcomings  stemming  from  the  Market  Abuse  Regulation  and 
MiFID II. Member States may adopt accepted market practice on liquidity contracts but only 
four have done so. This means that in 24 Member States, the potential SME Growth Market 
issuers  are  deprived  from  the  right  to  enter  into  liquidity  contracts.  This  situation  creates  a 
fragmentation  of  the  Single  Market  and  creates  a  distortion  of  competition  between  issuers 
that have the right to enter into a liquidity contract (and therefore ensure liquidity, lower their 
cost  of  capital…)  and  those  which  do  not  have  this  possibility.  Limited  trading  due  to  the 
absence of free float on admission may cause investors to have a negative perception of the 
liquidity  of  securities  listed  on  SME  Growth  Markets.  As  the  EU  label  will  be  shared  by 
different MTFs across the EU, this lack of liquidity on the secondary market could impair the 
credibility  and  attractiveness  of  those  newly-created  trading  venues.  Action  is  needed  at 
European level to ensure that the identified regulatory shortcomings resulting from European 
rules are adequately tackled and that minimum liquidity can be ensured on those markets.    

3.3

Subsidiarity: Added value of EU action 

It has to be considered whether the objectives would be better achieved by action at EU level 
(the so-called 'test of European added-value').  As there is almost no flexibility to adapt the 
Markets in Financial Instruments Directive II, the Market Abuse Regulation and Prospectus 
Regulation to local conditions, a legislative action at EU level is absolutely needed in order to 
reduce  the  administrative  burden  placed  on  SME  Growth  Market  issuers.  By  its  scale,  EU 
action  could  reduce  the  administrative  burden  for  SME  issuers  while  at  the  same  time 
safeguarding a high level of market integrity and  investor protection (thus ensuring a level-
playing field among issuers and avoiding any distortions of competition among 'SME Growth 
Markets').  

Furthermore,  as  regards  the  regulatory  obstacles  impairing  liquidity  provision,  action  at 
national  level  can  even  increase  legal  fragmentation  and  may  lead  to  distortions  in 
competition of SME Growth Markets across EU Member States. Action at the European level 

133 Vodafone case C-58/08: ' Where an act based on Article 95 EC has already removed any obstacle to trade in the area 
that  it  harmonises,  the  Community  legislature  cannot  be  denied  the  possibility  of  adapting  that  act  to  any  change  in 
circumstances or development of knowledge having regard to its task of safeguarding the general interests recognised by the 
Treaty' 

27 

 
 
 
 
                                                 
is better suited to ensure uniformity, and legal certainty. This will help to efficiently achieve 
the objectives of the Markets in Financial Instruments Directive II (and notably the creation 
of SME Growth Markets) and will better facilitate cross-border investments and competition 
between exchanges while safeguarding the orderly functioning of markets.  

The options proposed respect the principle of proportionality, are adequate for reaching the 
objectives and do not go beyond what is necessary, striking a balance between establishing 
pan-European standards while at the same time leaving sufficient flexibility to both Member 
States  and  market  operators/investment  firms  to  adapt  their  SME  Growth  Markets  to  local 
conditions.   

4

  OBJECTIVES: WHAT IS TO BE ACHIEVED? 

The general objective of the proposal would be to make technical amendments to the current 
regulatory  requirements  in  order  to  facilitate  capital-raising  by  SMEs  on  public  markets 
through  shares  or  bonds  issuances.  This  should  help  to  increase  investment,  economic 
growth, job creation and innovation in the EU.   

Specific objectives would therefore be: 1) to reduce the regulatory compliance costs faced by 
SME issuers when their shares or bonds are admitted to trading on SME Growth Markets; 2) 
to increase the liquidity of equity instruments on SME Growth Markets; and 3) to ensure a 
high level of investor protection and market integrity134. 

5

  WHAT ARE THE AVAILABLE POLICY OPTIONS? 

The  policy  options  described  and  analysed  in  this  impact  assessment  have  been  regrouped 
into  three  topics:  administrative  compliance  costs,  SME  Growth  Market  concept,  and 
liquidity. For each topic, several provisions have been analysed in parallel following a given 
logic  of  intervention  (essentially  by  degree  of  alleviation  or  harmonisation).  This  grouping 
was done notably to better highlight the collective impact of all the proposed change on one 
given  regulation  or  one  set  of  issues.  Presenting  all  changes  separately  could  have  made  it 
more  difficult  to  perceive  the  actual  cumulative  impact  of  the  adjustments.  Each  change, 
however, was also assessed individually, as presented in section 6. 

The set of provisions analysed are those for which there was sufficient evidence of a need for 
action.  Commission  services  initially  considered  a  much  broader  set  of  potential  changes, 
which emerged from the various consultation exercises, seminars organised with stakeholders 
and  meetings  with  Member  State  representatives.  Many  were  however  discarded  after  a 
preliminary  analysis,  either  due  to  market  integrity  risks,  political  feasibility,  or  lack  of 
evidence. For more details, please refer to annex 6 on discarded options and annex 16 on the 
synthesis table of the initial options.  

134 A  study  from  IOSCO  there  is  no  available  data  on  the  difference  between  market  abuse  cases  for  SMEs  and  larger 
companies.  In  some  developed  markets  where  information  is  available,  the  incidences  or  reports  of  market  manipulation 
appear to be higher in the SME market than in the senior market. This appears to be related to a number of circumstances 
including  greater  likelihood  that  the  float  is  controlled  by  insiders  and  illiquidity  of  the  market.  IOSCO,  SME  Financing 
through Capital Markets, July 2015   

28 

 
 
 
                                                 
5.1

  What is the baseline from which options are assessed? 

Under  the  baseline  scenario  no  action  would  be  taken  beyond  the  non-legislative  measures 
that  the  Commission  services  have  already  committed  to  (see  section  1.2).  While  recent 
legislative  actions  such  as  the  creation  of  an  alleviated  'EU  Growth  Prospectus'  will  reduce 
the costs of listing for SMEs, other administrative compliance costs would remain in place. 
This  includes  in  particular  the  costs  arising  from  the  obligations  in  the  Market  Abuse 
Regulation  and  the  financial  reporting  obligations  in  the  Markets  in  Financial  Instruments 
Directive II. These obligations would continue to place a disproportionately high burden on 
SME issuers, thereby dis-incentivising smaller companies to raise capital on public markets.  

The  SME  Growth  Market  definition,  and  in  particular  the  definition  of  a  debt-only  issuer, 
would remain overly restrictive, thereby preventing most European MTFs (either specialised 
in  SME  bonds  or  in  SME  bonds  and  shares)  to  register  as  SME  Growth  Markets.  This,  in 
turn,  would  make  it  impossible  for  issuers  on  these  markets  to  benefit  from  the  regulatory 
alleviations and potential other benefits that legislators envisioned for SME Growth Markets.   

Investors  would  also  remain  reluctant  to  invest  in  SME  shares  given  excessively  high 
liquidity risks in many small and micro-cap shares. While SME issuers have always attracted 
lower  levels  of  investor  interests  and  thus  trading  activity  and  liquidity,  certain  regulatory 
restrictions would continue to exacerbate this unfavourable market condition. These barriers 
include in particular, the unavailability of liquidity contracts in most Member States. Given 
the  self-reinforcing  nature  of  liquidity  it  is  expected  that  liquidity  levels  will  remain  low 
without  such  initial  stimuli.  Moreover,  minimal  free  float  percentages  would  continue  to 
restrict the total amount of shares available for trading.  

As a result, SMEs would continue to face significant hurdles and disincentives to tap public 
markets for capital. While recent trends indicate that the dependence of European companies 
on  bank  loans  has  decreased  overall,  SMEs  have  remained  largely  dependent  on  bank 
financing135. If no further regulatory efforts are made to alleviate this dependence, SMEs will 
continue  to  exhibit  a  large  exposure  to  banking  sector  shocks,  thereby  increasing  potential 
contagion  effects  on  the  real  economy.  SMEs  would  also  remain  less  flexible  in  their 
financing  decisions  overall,  which  would  impede  growth  especially  for  rapidly  expanding 
companies.  It  would  also  prevent  SMEs  from  optimising  their  capital  structure,  thereby 
giving rise to competitive disadvantages vis-à-vis larger companies.  

These  detrimental  impacts  are  unlikely  to  decrease  in  magnitude  without  further  regulatory 
changes that are part of a wider plan to enhance SME access to public capital markets. On the 
contrary, market developments such as the overwhelming dominance of alternative liquidity 
provision via high frequency trading (HFT) strategies are likely to intensify liquidity issues in 
SME  values.  It  is  generally  not  possible  to  apply  HFT  market  making  strategies  in  illiquid 
financial  assets,  especially  in  the  absence  of  efficient  hedging  markets.  HFTs  have  pushed 
most traditional market makers out of liquid large and mid-caps. Traditional market makers 
that may also provide quotes in illiquid SME values are thus facing reduced revenues. This 
has already forced some of them to exit the market. Meanwhile, the administrative costs of 
listing for SMEs will remain the same. Ultimately, the disincentives of listing are expected to 
increase while there is no foreseeable increase in incentives.    

135 Indicated by the fact that "only credit constraints in bank financing have a significant effect" on the investment decision 
of SMEs – See 'Credit constraints, firm investment and growth: evidence from survey data' – ECB, Feb. 2018  

29 

 
 
                                                 
5.2

Policy options addressing administrative compliance costs  

5.2.1

  Options under the Market Abuse Regulation  

Management Transactions 

Insider 
Lists 

Delay in 
disclosing inside 
information 

Market 
soundings  

Option 1. 
Light-touch 
alleviations 
strictly 
confined to the 
procedures   

Option 2. 
Relief limited 
to the scope, 
disclosure and 
record-
keeping 
obligations.  

Option 3. 
Partial 
exemption 
from certain 
regulatory 
requirements   

Extend to 5 days 
the deadline for 
PDMRs to report 
transactions to 
issuers and NCA 
and for issuers to 
publicly disclose 
these transactions  
Adopt a new 
deadline for issuers 
to publicly disclose 
transactions relative 
to the notification 
by PDMRs and 
extend the overall 
deadline to 5 days 

Replace the fixed 
threshold for 
transactions requiring 
disclosure by a 
relative threshold 
based on the issuer's 
market capitalisation 
(e.g. 0.02%) 

SME GM 
issuers only 
need to 
provide a list 
of insiders 
upon NCA 
request 

Justifications for 
delaying the 
disclosure of 
inside information 
only need to be 
issued upon NCA 
request 

Raise the threshold 
for transactions 
required to be 
disclosed to EUR 
20,000   

SME GM 
issuers only 
need to 
maintain a  
list of 
'permanent 
insiders' 

Justification only 
upon NCA 
request + no need 
to keep a 
disclosure record.  

Issuers are exempt from the responsibility to 
disclose managers' transaction to the public. 
The responsibility is placed on NCAs 
instead [supplementary to changing 
thresholds]  

Exempt 
SME issuers 
from 
maintaining 
an insider 
list  

Exempt SME 
issuers from 
notifying a delay 
to disclose inside 
information to the 
NCA.  

Exempt 
private 
placement of 
bonds from 
the market 
sounding 
regime when 
the investors 
enter directly 
in the 
negotiations 
phase (with an 
alternative 
wall-crossing 
procedure is in 
place) 
Exempt 
private 
placements  of 
from 
bonds 
the 
market 
sounding 
regime  

all 

The policy options regarding the Market Abuse Regulation aim to reduce the administrative 
compliance  costs  for  SME  issuers  and  to  make  obligations  placed  on  them  more 
proportionate. There are three potential approaches under the Market Abuse Regulation that 
could  be  adopted.  These  approaches  differ  in  the  degree  of  alleviation  that  they  apply  to 
MAR provisions: from light-touch to more far-reaching alleviations, and finally exemptions 
from  the  various  obligations  analysed.  It  should  be  understood  that  the  Market  Abuse 
Regulation  provisions  analysed  here  are  those  for  which  adjustments  can  be  made  without 
decreasing investor  confidence  or  market integrity. Other changes or  provisions could  have 
been considered in addition to the ones outlined in the table here-above, but were discarded 
up front because of their risks towards market integrity (see annexes 6 on discarded options 
and 16 on the synthesis table of the initial options). The purpose of the present initiative is in 
no way to deconstruct the market abuse regime. Adjustments shall only focus on simplifying 
procedures for issuers and redistributing the burden between issuers and National Competent 
Authorities.  

Option  1  would  foresee  to  extend  the  deadline  for  Persons  Discharging  Managerial 
Responsibilities  (PDMRs)  and  Persons  Closely  Associated  (PCAs)  to  them  to  report 
transactions  to  issuers  and  the  national  competent  authority  to  5  days.  The  same  deadline 
would apply for SME GM issuers to publicly disclose these transactions. PDMR transactions 
would  furthermore  only  be  captured  by  the  disclosure  requirement  once  they  breach  an 
annual  threshold  set  in  relative  terms  to  the  respective  issuer's  market  capitalisation  (e.g. 
0.02%  as  computed  at  the  end  of  the  previous  calendar  year).  As  concerns  the  delayed 
disclosure  of  insider  information,  issuers  would  only  need  to  notify  the  national  competent 
authority.  A  full  justification  for  such  delays  would  only  be  required  upon  explicit  request 
30 

 
 
 
 
 
from the national competent authority. Option 1 would also exempt the private placements of 
bonds from the market sounding rules, provided that institutional investors are involved in the 
negotiations  and  when  an  adequate  wall-crossing 136  procedure  is  in  place  (such  as  the 
signature  of  a  non-disclosure  agreement  recalling  the  obligations  in  case  of  disclosure  of 
inside  information).  In  terms  of  the  requirement  for  maintaining  insider  lists,  no  changes 
would apply compared to the baseline, as the current regime for insider lists applying to SME 
Growth Market issuers is already alleviated.    

Option 2 would provide more far-reaching alleviations from the current requirements under 
the Market Abuse Regulation than option 1. It would not extend the deadline for PDMRs to 
report transactions. Issuers however would receive additional time to publicly disclose these 
transactions  after  the  PDMR  reports  them  (e.g.  to  disclose  within  2  days  following  the 
notification from the PDMR – see annex 17 for more details). Furthermore, the threshold for 
the  disclosure  requirement  of  PDMR  transactions  would  be  increased  to  EUR  20,000  on  a 
fixed basis. Option 2 would also lower the requirements for SME Growth Market issuers to 
maintain  an  insider  list.  Instead  of  an  obligation  to  provide  a  full  list  of  insiders  to  the 
national competent authority on-demand, as required under the baseline, issuers would only 
have to maintain a list of 'permanent insiders'137. This list would only capture managers and 
employees  that  have  regular  access  to  inside  information  and  would  be  updated  on  a 
continuous  basis.  Persons  that  are  infrequently  exposed  to  single  sets  of  inside  information 
would  not  be  included.  As  under  option  1,  a  full  justification  for  the  delayed  disclosure  of 
inside information would only be required on request of the NCA. In addition, SME Growth 
Market  issuers  would  be  exempt  from  the  requirement  to  keep  a  record  of  delayed 
disclosures. As regards private placements of bonds by SME issuers, option 2 would foresee 
no changes compared to option 1.   

Option 3 would envision exempting SME Growth Market issuers from the current the Market 
Abuse Regulation requirements in the areas specified. Issuers would no longer be required to 
publicly disclose manager transactions. National competent authorities would be responsible 
for  the  publication  instead.  This  could  be  coupled  with  an  increase  in  the  threshold  for 
transactions  requiring  disclosure  as  per  option  1  or  2.    SME  Growth  Market  issuers  would 
furthermore be exempted from both the obligation to maintain an insider list and notifying the 
delay  in  disclosing  inside  information  to  their  national  competent  authorities.  The  option 
would also exempt all private placements of bonds from the market sounding regime, without 
requiring an alternative wall-crossing procedure. 

Scope of the Options under the Market Abuse Regulation  

Option 1. Restricted scope for alleviations under MAR 

Type of issuers 
SME listed on SME Growth Companies 

Option 2. Extended scope for alleviations under MAR  

All SME Growth Market issuers 

Under  Option  1,  only  SMEs  (defined  as  equity  issuers  with  a  market  capitalisation  below 
EUR  200  million  or  debt-only  issuers  meeting  two  of  the  three  criteria  set  by  the  2003 
Recommendation on the definition of SMEs) listed on an SME Growth Market would be able 
to  benefit  from  the  above-mentioned  targeted  alleviations  under  the  Market  Abuse 
Regulation.  

136 Wall crossing is the act of making a person an “insider” by providing them with inside information 
137 This list could be equivalent to the list of PDMRs  

31 

 
 
 
                                                 
Under Option 2, all the SME Growth Market issuers (irrespective of their size) would benefit 
from the potential alleviations under the Market Abuse Regulation.  

5.2.2

  Options under the Prospectus Regulation 

Option 1. Partial 
alleviation 
Option 2. 
Admission 
document 

Requirements to transfer from an SME Growth Market to a regulated market 
Create  a  lighter  "transfer  prospectus"  for  issuers  having  been  listed  for  a  certain 
amount of time on an SME Growth Market (e.g. 3 years) 
Require an admission document (no approval by an NCA) instead of a full prospectus 
for companies that have been listed on an SME Growth Market for a certain amount 
of time (e.g. 3 years) 

The two options aim at reducing the administrative burden imposed by the publication of a 
full prospectus in case of a transfer to a regulated market for issuers already listed on an SME 
Growth Market for a certain amount of time. Under Option 1, this alleviation would take the 
form  of  a  new  lightened  prospectus  ('a  transfer  prospectus').  Option  2  would  exempt  the 
issuers  from  the  prospectus  publication  obligation,  provided  that  an  admission  document  is 
produced in accordance with the regulated market's listing rules. 

5.3

Policy options concerning the SME Growth Market definition 

5.3.1

  Defining criteria and thresholds for equity and debt-only issuers 

Definition of SME Growth Market 

for 

Option 1.  Unique 
definition of SMEs 
2.  Market 
Option 
definition 
debt 
issuers,  raised  threshold 
for  equity 
issuer  and 
raised SME proportion 
Option  3.  Alternative 
market  definition 
for 
debt  issuer  and  raised 
equity 
threshold 
issuer 

for 

Definition  of  SME 
equity issuers 

Definition  of  SME  debt-
only issuers 
Increase  the  thresholds  of  the  2003  recommendation 
definition to match the profile of SMEs today  
Define  an  SME  debt  issuer 
based  on  the  value  of  the 
issuance  (50  million  over 
one year) 

Raising the market 
capitalisation threshold 
for equity issuers from 
EUR 200 to EUR 500 
million  

Define  an  SME  debt  issuer 
based  on  the  value  of  its 
outstanding bonds (EUR 150 
million) 

Proportion of SMEs 

Left  unchanged  (at 
least 50%) 
Raised 
least) 

to  75%  (at 

Left  unchanged  (at 
least 50%) 

Option 1 would consist in creating a single definition for SMEs (either equity issuer or debt-
only issuer) listed on an SME Growth Market. This definition would be based on the criteria 
from  the  2003  Recommendation  on  SME  definition138 while  raising  the  thresholds  it  sets. 
Under this Option, an issuer would be deemed an SME if it meets two of the three following 
criteria: (i) an annual turnover below EUR 200 million, (ii) a total balance sheet below EUR 
200 million and (iii) a number of employees up to 499. Under this option, the proportion of 
SMEs would be left unchanged compared to the baseline (at least 50%).   

Option 2 would amend the definition of an SME debt-only issuer based on the value of the 
issuance. The threshold for qualifying as an SME debt-only issuer would be set at EUR 50 
million  over  a  period  of  12  months.  As  regards  the  equity  issuer  definition,  the  market 

138

Under the 2003 Recommendation,  two of the three criteria should be met:  number of employees below 250, annual turnover below EUR 

50 million and size of balance sheet below EUR 43 million) 

32 

 
 
 
 
 
 
 
 
                                                 
capitalisation threshold would be raised from EUR 200 to EUR 500 million. Finally, at least 
75% of SMEs would be required on an SME Growth Market.  

Option 3 would define an SME debt issuer on the basis of an issuer’s total nominal value of 
outstanding bonds. The threshold would be set at EUR 150 million. Like option 2, the market 
capitalisation threshold defining an SME would be raised to EUR 500 million. However, the 
proportion of SMEs would be left unchanged compared to the baseline (at least 50%). 

5.3.2

  Half-yearly reports 

Option  1.  Exemption 
for non-equity issuers 

Option  2.  Exemption 
for  equity  and  non-
equity issuers 

Half yearly reports  
Allow  SME  Growth  Market  operators  to  decide  whether  or  not  to  apply  an 
obligation for half-yearly reports to non-equity issuers  

Allow  SME  Growth  Market  operators  to  decide  whether  or  not  to  apply  an 
obligation for half-yearly reports to equity and non-equity issuers  

Option  1 would remove the obligation  for non-equity issuers to  publish half-yearly reports 
when  their  bonds  are  listed  on  an  SME  Growth  Market.  Market  operators  could  however 
decide to impose half-yearly reports as part of their internal listing rules.  

Like option 1, option  2 would remove the obligation for non-equity issuers to publish half-
yearly  reports  but  it  would  also  exempt  equity  issuers  from  this  requirement.  Discretion 
would be left to market operators to impose half-yearly reports on equity and/or non-equity 
issuers through their listing rules.   

5.4

Policy options to address liquidity on SME Growth Markets 

Option 1. 29th 
regime  +  free 
float  
Option 2.  
Full 
harmonisation 

Liquidity contracts  
Create  a  European  regime  for  liquidity  contracts, 
while  authorising  NCAs  to  submit  an  AMP  and 
develop a parallel regime tailored to local conditions.   
Create  a  fully  harmonised  EU  liquidity  provision 
scheme  with  all  conditions  set  out  at  EU  level, 
without  the  possibility  for  NCAs  to  submit  an  AMP 
tailored to local conditions.  

Free float requirements 
Oblige  SME  GMs  to  impose  a 
free float requirement but provide 
flexibility on exact criteria   
Impose  precise  free  float  criteria 
for SME GMs 

Option 1 would consist in imposing a minimum free float requirement on issuers’ capital at 
the time of admission to trading, and in authorising liquidity contracts in all Member States 
through the creation of a dedicated EU legal framework (a 29th regime) on liquidity contracts. 
This  option  would  allow  for  some  flexibility.  National  regulators  would  still  be  allowed  to 
establish  in  parallel  an  accepted  market  practice  (AMP)  on  liquidity  contracts  in  order  to 
better adapt such contracts to their local markets. Concerning free float, the value and nature 
of the required minimum would be set by each market operator to fit their local contexts. 

Option  2 would also require all SME Growth Market operators to  impose  a minimum free 
float  at  admission,  and  authorise  liquidity  contracts  in  all  Member  States.  However,  as 
opposed  to  option  1,  no  deviation  from  the  European  standard  would  be  possible:  the  free 
float  requirement  (including  its  criteria)  would  be  set  at  EU  level,  and  national  authorities 
would not be allowed to establish accepted market practices to deviate from the EU liquidity 
contract regime.  

33 

 
 
 
 
 
 
5.5

  Options discarded at an early stage 

Several  potential  adjustments,  initially  included  in  the  public  consultation  "Building  a 
proportionate  regulatory  environment  to  support  SME  listing",  have  been  discarded  after 
preliminary analyses, due to either lack of evidence, lack of overall support, market integrity 
risks  or  potential  additional  costs  to  issuers.  These  options  include  requiring  key  advisers, 
harmonising delisting rules on SME Growth Markets, simplifying transfers of listing from a 
regulated to an SME Growth Market, reducing disclosure requirements of inside information 
by SME Growth Market bond issuers, and amending the tick-size regime applicable to equity 
instruments listed on SME Growth Markets. For more details, please refer to annex 6.  

6

  WHAT ARE THE IMPACTS OF THE POLICY OPTIONS? 

6.1

Policy options addressing administrative compliance costs 

6.1.1

  Market Abuse Regulation  

Management Transactions 

Insider Lists 

Replace the fixed 
threshold for 
transactions 
requiring disclosure 
by a relative 
threshold based on 
the issuer's market 
capitalisation (e.g. 
0.02%) 

SME GM 
issuers only 
need to 
provide a list 
of insiders 
upon NCA 
request  

Delay in 
disclosing inside 
information 

Justifications for 
delaying the 
disclosure of 
inside information 
only need to be 
issued upon NCA 
request 

Raise the threshold 
for transactions 
required to be 
disclosed to EUR 
20,000   

SME GM 
issuers only 
need to 
maintain a  list 
of 'permanent 
insiders' 

Justification only 
upon NCA 
request + no need 
to keep a 
disclosure record.  

Market 
soundings  

Exempt private 
placement of 
bonds from the 
market sounding 
regime when the 
investors  
enter directly in 
the negotiation 
phase 
(with an 
alternative wall-
crossing 
procedure is in 
place) 

Extend to 5 days 
the deadline for 
PDMRs to report 
transactions to 
issuers and NCA 
and for issuers to 
publicly disclose 
these transactions  

Adopt a new 
deadline for issuers 
to publicly disclose 
transactions relative 
to the notification 
by PDMRs and 
extend the overall 
deadline to 5 days 

Option 1. 
Light-touch 
alleviations 
strictly 
confined to the 
procedures   

Option 2. 
Relief limited 
to the scope, 
disclosure and 
record-
keeping 
obligations.  

Option 3. 
Partial 
exemption 
from certain 
regulatory 
requirements   

Issuers are exempt from the responsibility 
to disclose managers' transaction to the 
public. The responsibility is placed on 
NCAs instead [supplementary to changing 
thresholds]  

Exempt SME 
issuers from 
maintaining an 
insider list  

Exempt SME 
issuers from 
notifying a delay 
to disclose inside 
information to the 
NCA.  

all 

Exempt 
private 
placements 
of 
bonds  from  the 
market sounding 
regime  

Option 1: Light-touch alleviations strictly confined to the procedures   

Option  1  would  provide  additional  time  for  the  disclosure  of  management  transaction  and 
would  re-calibrate  the  threshold  above  which  transactions  need  to  be  notified  on  a  relative 
basis compared to the respective issuer's market capitalisation (e.g. 0.02%)139. For investors, 
this solution would mean that the managers' transactions that are the most informative for the 
market (as they exceed a certain percentage of the market capitalisation) would be disclosed. 
For managers and issuers, the use of a market capitalisation criterion would not necessarily 

139 An EU small Business Act (report by F Demarigny), 2009 

34 

 
 
 
 
                                                 
translate into fewer transactions to be notified and disclosed. As shown in the Table below, 
with a relative threshold set at 0.02% of market capitalisation, the alleviation compared to the 
current  threshold  of  EUR  5,000  would  only  kick  in  for  companies  with  a  market 
capitalisation above EUR 25 million. Furthermore, some stakeholders have underlined that it 
can be challenging for managers and closely associated persons to keep track of the current 
EUR  5,000  threshold 140.  Their  task  would  be  made  even  more  complex  by  a  threshold 
expressed in a market capitalisation percentage.  

Issuer's 
capitalisation 
Threshold of 
notification 

EUR 10 
million 
EUR  
2,000 

EUR 25 
million 
EUR  
5,000 

EUR 50 
million 
EUR 
10,000 

EUR 100 
million 
EUR 
20,000 

EUR 200 
million 
EUR 
40,000 

EUR 500 
Million 
EUR 
100,000 

EUR 1 
billion 
EUR 
200,000 

Under this Option, the additional time for the notification would provide both managers and 
issuers with greater flexibility, thus further reducing their administrative burden141. However, 
this extension of delay would not solve one difficulty frequently mentioned by respondents to 
the  public  consultation:  the  transactions  are  sometimes  notified  to  the  issuer  lately,  which 
often  leaves  little  to  no  time  at  all  to  disclose  those  transactions  to  the  market.  Both 
amendments  on  managers'  transactions  would  have  little  to  no  impact  on  market  integrity. 
This  extension  of  delay  would  mean  that  investors  would  still  be  informed  of  managers' 
transactions  (five  days  after  the  transaction  instead  of  three  days142).  While  increasing  the 
threshold  may  have  a  marginal  impact  on  the  ability  of  national  competent  authorities  to 
detect  insider  trading,  other  supervisory  tools  (e.g.  suspicious  transactions  reports)  would 
similarly trigger alerts which could then be further investigated.  

The  envisioned  change  to  provide  a  justification  for  the  delay  of  disclosing  insider 
information  only  upon  request  of  the  responsible  national  competent  authority  would 
similarly  reduce  administrative  burden  for  issuers  while  incurring  a  minimal  impact  on  the 
ability of national competent authorities to monitor the lawful disclosure of such information. 
Since issuers would still notify the national competent authority when there is a delay in the 
disclosure  of  information,  any  suspicion  of  irregularities  could  be  directly  examined  by 
issuing  a  respective  request  for  justification.  However,  the  burden  alleviation  for  issuers 
would have a limited impact, as the issuer would still be obliged to keep 'a disclosure record' 
to  provide  the  national  competent  authorities  with  the  necessary  justifications  when 
requested.  

Option 1 would bring legal clarification by exempting private placements of bonds issued by 
SME Growth Market issuers from the market sounding regime under the the Market Abuse 
Regulation. This would reduce the administrative burden on issuers and those acting on their 
behalf  (such  as  the  arranger  banks).  By  lightening  the  administrative  constraints  on 
prospective  investors  that  could  participate  in  the  structuring  of  private  placement 
transactions,  this  would  also  facilitate  debt  issuances  by  SMEs.  Such  a  modification  would 
also  better  reflect  the  nature  of  private  placements  of  bonds,  where  'investor  contacts  form 

140 Public  consultation  on  SME  listing  (responses  from  Swedish  Securities  Dealer  Association,  Nordic  Growth  Market, 
AktieTorget and QCA) 
141 One way to reduce the administrative burden placed on SMEs is to give them more time than large companies to fulfil 
their obligations (See: European Commission, 'Models to reduce the disproportionate burden on SMEs, 2009).   
142 This would correspond to the market standard before the entry into application of the Market Abuse Regulation in July 
2016. Under MAD, 22 Member States (AT, BE, BG, CZ, DE, EE, ES, FR, IE, IT, LT, LU, LV, MT, NL, PL, PT, RO, SE, 
SK, SI) required that the notification of managers' transactions shall be made within five working days (Source: CESR/09-
1120).    

35 

 
 
                                                 
part  of  an  inherent  process  of  negotiations  with  the  entire  set  of  potential  investors  with 
whom  a  transaction  might  occur,  rather  than  a  (helpful,  though  not  inherently  necessary) 
mean  to  test  an  offering's  viability  before  presentation  to  a  wider  group  of  investors'143. 
Under  this  Option,  both  issuers  and  those  acting  on  their  behalf  would  have  to  apply  an 
adequate  wall-crossing  procedure,  as  negotiated  private  placements  may  give  rise  to 
disclosure  of  inside  information  (e.g.  on  the  issuer's  creditworthiness).  This  wall-crossing 
procedure  could  take  the  form  of  the  mandatory  signature  of  a  non-disclosure  agreement 
between institutional investors involved in the subsequent negotiations with the issuer and/or 
its arranger, which would make sure that all parties are aware of their obligations regarding 
inside  information  disclosure 144 .  The  signature  of  a  non-disclosure  agreement  (that 
corresponds to current market practice) would help preserve market integrity, while placing a 
less  significant  burden  on  issuers  that  would  not  deter  them  from  negotiating  a  private 
placement.   

Option 2. Relief limited to the scope, disclosure and record-keeping obligations 

Similar to option 1, option 2 foresees targeted amendments to the current requirements that 
would  lower  the  administrative  compliance  costs  for  SME  Growth  Market  issuers.  The 
amendments under option 2 would however imply more far-reaching alleviations.  

In terms of the requirements to disclose managers’ transactions, option 2 provides the benefit 
of  setting  the  deadline  for  the  public  disclosure  in  relation  to  the  timing  of  the  PDMR 
notification.  This  would  ensure  that  the  issuer  always  has  sufficient  time  for  the  disclosure 
process  and  provides  issuers  with  additional  temporal  flexibility  (see  annex  17  for  more 
details). Meanwhile, the increase of the disclosure threshold on fixed terms (from EUR 5,000 
to EUR 20,000) would equally reduce the cost burden for issuers. In relative terms, smaller 
issuers would be alleviated slightly more strongly, as the EUR 20,000 threshold would reflect 
a  larger  percentage  of  their  overall  market  capitalisation.  A  higher  fixed  threshold  also 
implies that fewer transactions would be disclosed. Ultimately though, as is also the case for 
option 1, other supervisory tools would still trigger alerts regardless of whether a transaction 
is captured by mandatory disclosure. Changing the maximum delay or threshold should thus 
bear little to no impact on market integrity. From an investor perspective, this option would 
entail  no  change,  as  investors  would  still  be  informed  of  managers'  transactions  (five  days 
maximum after the transactions). The situation would be further improved as small managers' 
transactions that carry less market signalling information (below EUR 20,000) would not be 
disclosed to the market.   

Option 2 would also include a change in terms of the obligation to maintain an insider list. 
Producing  an  insider  list  upon  request  from  an  national  competent  authority  (as  under  the 
baseline and option 1) entails no real cost savings as inside information and persons having 
access to such information still need to be monitored on an on-going basis for the issuer to be 
able to draw up an insider list if requested by the national competent authority. Issuers have 

143 Cleary  Gottlieb,  Market  abuse  Regulation:  A  Balanced  Approach  to  the  Market  Sounding  Regime's  Applicability  in 
Capital Markets Transactions, June 2017 
144 Some  industry  organisations  already  recommend  the  signature  of  such  an  agreement  when  parties  are  entering  into 
negotiations for a private placement of bonds. Both the European Corporate Debt Private Placement Market Guide (2016) 
of  the  International  Capital  markets  Associations  and  the  Euro-PP  Charter  recommend  the  signature  of  a  non-disclosure 
agreement. In those non-disclosure agreement template, there is a provision on 'inside information' stating that 'The Recipient 
agrees and acknowledges that some or all of the Confidential Information is or may be price-sensitive information and that 
the  use  of  such  information  may  be  regulated  or  prohibited  by  applicable  legislation  relating  to  insider  dealing  and  the 
Recipient undertakes not to use such Confidential Information for any unlawful purpose in contravention of such legislation' 

36 

 
 
                                                 
to produce ad hoc lists of insiders several times a year for each piece of inside information145. 
Option 2 therefore foresees to require only one list of 'permanent insiders' (i.e. only capturing 
managers and staff that have regular access to inside information) in order to avoid the costs 
of on-going monitoring and tracking146. The impact that this would have on the capacity of 
national  competent  authorities  to  detect  insider  trading  would  be  minimal,  as  (i)  national 
competent  authorities  rarely  rely  on  insider  lists  for  the  identification  of  insider  trading147, 
and (ii) not everyone having access to a particular set of inside information would necessarily 
be captured by an on-going insider list in any case148. However, a list of permanent insiders 
can  raise  another  issue,  namely  that  it  does  not  provide  real  guidance  as  to  whether  a 
particular person has in fact received a particular piece of information149.  

As concerns the delayed disclosure of inside information, option 2 would also exempt issuers 
from maintaining a disclosure record, beyond placing the justification delay on an 'on-request' 
basis.  This would  lower  the administrative  costs  significantly  more.  In  addition,  this  would 
enable to preserve the issuers' legitimate interests, as anecdotal evidence suggests that issuers 
are  currently  incentivised  to  disclose  inside  information  earlier  than  necessary  to  avoid 
recoding cumbersome justifications for the delay in disclosure150. At the same time, national 
competent  authorities  could  keep  an  internal  record  of  delayed  disclosures,  if  deemed 
necessary,  as  notification  of  delays  would  still  apply.  As  national  competent  authorities 
would still be able to request a justification for the delay (prepared ex-post by the issuer), the 
impact  on  market  integrity  would  be  minimal.  As  regards  private  placements  of  bonds  by 
SME issuers, option 2 would foresee no changes compared to option 1.  

Option 3: Partial exemption from certain regulatory requirements   

Option  3  would  grant  SME  issuers  a  range  of  exemptions  from  current  requirements.  This 
would have a greater positive impact on the administrative compliance costs faced by SME 
Growth Market issuers.  

Under  this  option,  national  competent  authorities  would  be  responsible  for  disclosing 
managers' transactions to the public, thus discharging issuers from this obligation. This would 
merely  shift  costs  from  issuers  to  national  competent  authorities  without  any  detrimental 
impacts  on  market  integrity.  National  competent  authorities  would  have  to  bear  the 
administrative  burden  (and  potential  liability  risks)  associated  with  disseminating  the 
information related to managers' transactions to the market. For investors, the situation would 
not be changed or would be slightly improved, as all managers' transactions on SME financial 
instruments would be accessible through one single national data-entry point. Some European 
national  competent  authorities  have  already  decided  to  use  this  method  and  taken  the 
initiative  to  discharge  issuers  from  the  obligation  to  disclose  managers’  transactions  to  the 
public.  Stakeholders  generally  admit  that  such  system  proves  extremely  efficient,  although 

145 Anecdotal evidence shows that issuers on AIM Italy disclosed 33 pieces of inside information (and therefore 33 insider 
lists) on average in 2017 (Source: IR Top Consulting,  Osservatorio Aim di IR Top: analisi Internal Dealing, January 2018) 
146 Evidence  from  the  Polish  market  shows  that  71%  of  NewConnect  issuers  keep  updated  a  permanent  insider  section  in 
their insider lists. Moreover, this permanent section seems to be easier to establish as it includes 7 people on average.  
147 The Commission has obtained data from 17 NCAs on the number of insider lists requested from MTF issuers in 2017. It 
appeared that 11 NCAs requested no insider list, 4 NCAs requested 1 insider lists and 2 NCA have requested 5 or 6 insider 
lists. See annex 11 for more details 
148 For instance, if an issuer is the target of an unsolicited/hostile takeover, the potential buyer (especially if it is a private 
company) is not required to produce an insider list.   
149 ESME  Report,  Market  Abuse  EU  legal  framework  and  its  implementation  by  Member  States:  a  first  evaluation,  June 
2007 
150 Technical workshop organised with EU securities exchanges on 14 November 2017 

37 

 
 
                                                 
not all European national competent authorities would have the resources both in terms of IT 
and budget.  

Under  this  option,  SME  Growth  Market  issuers  would  also  be  exempted  from  maintaining 
insider  lists  and  justifying  delays  in  disclosing  inside  information.  This  solution  would  be 
justified  as  the  usefulness  of  insider  lists  for  insider  dealing  investigations  has  been 
questioned  several  times 151 .  As  the  flow  of  insider  information  generated  by  SMEs  is 
significantly  lower  and  concentrated  on  few  managers 152,  national  competent  authorities 
could  easily  identify  insiders  (and  potential  insider  dealings)  through  other  investigation 
techniques. While reducing administrative costs more significantly than options 1 or 2, there 
are  potential  market  integrity  risks  that  could  arise  from  this  amendment.  In  addition  to 
facilitating insider dealing investigations, the insider list requirement has also an educational 
impact by ensuring that people featured on the list understand the meaning and consequences 
of having access to inside information.  

Under  Option  3,  SME  issuers  would  not  be  required  to  inform  the  national  competent 
authority  in  the  event  of  delayed  disclosure  (but  would  still  be  required  to  provide  a 
justification  ex-post  when  requested  by  the  national  competent  authority).  This  solution 
would further reduce the administrative burden on SME issuers. While the absence of insider 
lists  could  be  compensated  for,  as  under  options  1  and  2,  by  other  supervisory  tools,  not 
notifying  national  competent  authorities  about  delays  of  disclosure  of  inside  information 
would  undermine  the  ability  of  national  competent  authorities  to  monitor  the  timely  and 
accurate  disclosure.  Delayed  disclosure  of  inside  information  increases  the  risk  of 
information leaks and, as a consequence, the risk of insider trading. Knowing that disclosure 
has  been  delayed  enables  targeted  monitoring  of  relevant  issuers  and  allows  national 
competent  authorities  to  intensify  their  surveillance  of  anomalous  price  movements  before 
important  announcements.  As  there  would  be  no  direct  means  to  verify  whether  disclosure 
has been delayed, there would be risks that some issuers exploit this exemption, to withhold 
negative news.  

Similar  to  Option  2,  option  3  would  exempt  SME  Growth  Market  issuers,  those  acting  on 
their  behalf,  and  investors  from  the  market  sounding  rules  foreseen  by  the  Market  Abuse 
Regulation. In addition, the parties to the negotiated private placement transaction would not 
have to put in place a wall-crossing procedure to avoid any disclosure of inside information. 
This option would alleviate the burden and would make the private placements of bonds more 
attractive for both issuers and investors. The absence of a wall-crossing procedure would also 
be  justified  by  the  fact  that  negotiated  private  placements  takes  place  with  institutional 
investors  who  are  more  familiar  with  duties  as  regards  inside  information.  In  the  past,  one 
Member State  already adopted  a market  practice on market soundings by excluding private 
placement transactions without requiring an alternative wall-crossing procedure (such as the 
signature  of  a  non-disclosure  agreement) 153.  This  option  would  finally  put  the  European 
private placement markets using a bond format (such as the Euro-PP in France and the mini-
bonds market in Italy and in Spain) on an equal footing with other private placement markets 
using  loans  that  are  not  considered  financial  instruments  under  the  Markets  in  Financial 

151 Carmine Di Noia, Pending Issues in the review of the European market abuses rules, ECMI Policy brief, February 2012; 
ESME Report, Market Abuse EU legal framework and its implementation by Member States: a first evaluation, June 2007 
152 Fabrice Demarigny, An EU Small Business Act, 2009 
153 'Norme professionnelle AMAFI relative aux sondages de marché et aux tests investisseur' in France 

38 

 
 
                                                 
Instruments Directive II and fall outside the scope of the Market Abuse Regulation and the 
market sounding regime154. 

EFFECTIVENESS 

        Objectives 

Objective 1 

Objective 2 

Objective 3 

Policy option  

Reduce 
compliance 
costs for SMEs 

Enhance 
 liquidity 

Maintain 
market 
integrity 

EFFICIENCY 
(cost-
effectiveness) 

Coherence 

SCORE 

0 

0 

0 

0 

0 

0 

≈ 

≈ 

+ 

to 

Baseline scenario 
Option  1.  Light-touch 
strictly 
alleviations 
confined 
the 
procedures   
Option  2. Relief limited 
to  the  scope,  disclosure 
and 
record-keeping 
obligations.  
Option 3. Partial 
exemption from certain 
regulatory requirements  
Magnitude  of  impact  as  compared  with  the  baseline  scenario  (the  baseline  is  indicated  as  0):  ++  strongly 
positive; + positive; – – strongly negative; – negative; ≈ marginal/neutral; ? uncertain; n.a. not applicable 

≈ or - 

≈ or - 

++ 

++ 

1.5 

4.5 

++ 

≈  

+ 

+ 

+ 

≈ 

1 

- 

- 

Impact on Stakeholders  

to 

1. Baseline scenario 
Option  1.  Light-touch 
strictly 
alleviations 
confined 
the 
procedures   
Option 2. Relief limited 
to the scope, disclosure 
and record-keeping 
obligations.  
Option 3. Partial 
exemption from certain 
regulatory requirements   

Issuers 

Investors 

0 

↑ 

0 

≈ or ↑ 

↑ or ↑↑ 

≈ or ↑ 

↑↑ 

≈ or↓   

Intermediaries / 
Market Makers 
0 

≈ 

≈ 

≈ 

Exchanges 

0 

≈  

≈  

≈  

NCAs/ 
Supervisors 
0 

≈  

≈ or ↓ 

↓↓ 

Overall, given the respective impacts of the options considered, the preferred approach 
would  be  option  2  (except  for  the  threshold  triggering  the  disclosure  of  managers' 
transaction). This option would maximise the administrative cost savings for SME Growth 
Market issuers while minimising potential detrimental impacts  on market integrity. national 
competent  authorities  would  essentially  have  the  same  ability  to  monitor  insider  trading 
activities  as  under  the  baseline.  The  increase  in  the  maximum  delay  for  disclosure  and  the 
creation of a permanent list of insiders would equally result in little to no detrimental impacts 
on  supervisory  activities,  while  decreasing  the  administrative  burden  and  compliance  costs 
for issuers. Lastly, the exemption for private placements of bonds would ensure that there is 
legal  clarity  on  this  matter  and  would  facilitate  such  transactions,  while  ensuring  that  all 

154  For  instance,  the  German  private  placement  market  (called  'Schuldschein')  relies  on  a  loan  format.  The  market 
participants in the French Euro-PP market can use both a loan and a bond format.  

39 

 
 
 
 
 
 
 
 
 
 
                                                 
parties  are  informed  of  their  obligations  as  regards  the  misuse  of  inside  information. 
However,  as  there  is  no  convincing  evidence  that  raising  the  threshold  triggering  the 
publication  of  managers'  transaction  would  substantially  lower  the  burden  on  SME  issuers, 
this aspect of Option 2 should not be considered. Furthermore, the Member States still have 
the option under the Market Abuse Regulation to raise this threshold up to EUR 20,000.  

Scope of the Options under the Market Abuse Regulation  

Option 1. Restricted scope for 
alleviations under MAR 
Option  2.  Extended  scope  for 
alleviations under MAR  

Type of issuers 
SME listed on SME Growth Companies 

All SME Growth Market issuers 

Option  1  would  restrict  the  alleviations  to  SMEs  and  would  not  allow  larger  issuers  on  an 
SME  Growth  market  to  benefit  from  potential  alleviations  under  the  Market  Abuse 
Regulation. A differentiated and proportionate regulatory treatment seems to be justified only 
when a company is small and cannot cope with its regulatory requirements, due to its small 
size and small financial resources. When a company ceases to be considered an SME under 
the  Markets  in  Financial  Instruments  Directive  II,  it  would  be  justified  that  the  company 
should be obliged to follow the same rules as any other issuers. Limiting the alleviations to 
SMEs would also minimise the risk of regulatory arbitrage by larger companies (above EUR 
200 million) that could be tempted to list their securities on an SME Growth markets to profit 
from targeted alleviations. This solution would also create a level-playing field between non-
SME issuers and companies listed on regulated markets. However, in practice, this solution 
could create a series of issues. From an investor perspective, the creation of two sets of rules 
applying  to  issuers  listed  on  the  same  type  of  trading  venues  is  likely  to  cause  confusion. 
Furthermore,  depending  on  the  volatility  of  the  markets,  some  companies  could  exceed  or 
drop  below  the  EUR  200  million  market  capitalisation  threshold,  which  would  affect  their 
SME  status.  For  those  companies,  this  would  imply  changing  their  internal  procedures  to 
meet lighter (or stricter) requirements, which could be costly and burdensome for issuers and 
misleading  for  investors.  Finally,  it  should  be  noted  that  MiFID  II  creates  three  types  of 
trading venues with different regulatory requirements (i.e. regulated markets, MTFs and SME 
Growth  markets).  This  complex  segmentation  could  be  made  even  more  complex  and 
confusing for investors if a subset of issuers on SME Growth Markets would be subject to a 
special treatment.      

Under Option 2, all issuers on SME Growth Markets would comply with the same set of rules 
under the Market Abuse Regulation, including the potential alleviations. This solution would 
be simpler to understand by both issuers and investors (who rely on the fact the companies of 
the  same  trading  venues  comply  with  the  same  set  of  requirements).  The  application  of 
uniform  rules  would  also  make  SME  Growth  issuers  attractive  for  larger  companies  that 
would otherwise have no reason to choose this form of trading venues. Uniform requirements 
would  enable  SME  Growth  Markets  to  attract  a  sufficient  number  of  non-SMEs,  thus 
fostering  liquidity  and  profitability  of  the  platform.  The  risk  of  regulatory  arbitrage  is  very 
limited as the number of non-SMEs on the current SME-dedicated markets is very low and 
likely  to  remain  so.  Large  companies  that  are  able  to  cope  with  the  more  stringent 
requirements  imposed  on  regulated  markets  would  prefer  a  listing  on  that  type  of  trading 
venues, for liquidity reasons and to attract other types of investors. Applying the same set of 
rules to issuers would also ensure that companies are not penalised because they are growing 
and their market capitalisation has exceeded EUR 200 million. This solution would also be 
consistent with the regime applying to regulated market issuers: on those trading venues, the 
40 

 
 
 
requirement  apply  to  issuers,  irrespective  of  their  size  and  even  if  they  could  fall  into  the 
MiFID  II  SME  definition.  This  solution  would  also  ensure  consistency  between  rules 
applying  to  SME  Growth  Market  issuers  in  general:  while  all  the  SME  Growth  Market 
issuers would be subject to the same admission rules and periodic information requirements 
(under MiFID II), they would also receive the same treatment as regards market abuse rules.  

EFFECTIVENESS 

        Objectives 

Objective 1 

Objective 2 

Objective 3 

Policy option  

Reduce 
compliance 
costs 
SMEs 

for 

Enhance 
 liquidity 

Maintain 
market 
integrity 

EFFICIENCY 

(cost-
effectiveness) 

Coherence 

SCORE 

0 

0 

0 

+ 

Baseline scenario 
Option  1.  Restricted 
scope 
for  alleviations 
under MAR 
Option 
scope 
under MAR 
Magnitude  of  impact  as  compared  with  the  baseline  scenario  (the  baseline  is  indicated  as  0):  ++  strongly 
positive; + positive; – – strongly negative; – negative; ≈ marginal/neutral; ? uncertain; n.a. not applicable 

2.  Extended 
for  alleviations 

+  

+  

≈  

+ 

+ 

+ 

-  

+ 

≈ 

2 

4 

0 

0 

0 

Impact on Stakeholders  

1.  Restricted 
alleviations 

1. Baseline scenario 
Option 
for 
scope 
under MAR 
Option 2. Extended scope 
for 
under 
MAR 

alleviations 

Issuers 

Investors 

0 

↑ 

↑↑ 

0 

↓ 

↑ 

Intermediaries / 
Market Makers 
0 

≈ 

≈ 

Exchanges 

NCAs/ 
Supervisors 

0 

↓ 

↑ 

≈ or ↓ 

≈ or ↑ 

For the sake of market consistency, simplicity and comprehensibility for both investors and 
issuers  and  due  to  the  possible  volatility  of  market  capitalisation  (and  its  impact  on  the 
issuer's qualification as an SME or not), the preferred option is option 2.  

6.1.2

  Prospectus/  transfer  of  listing  from  an  SME  Growth  market  to  a 

regulated market 

Option 1. Partial 
alleviation 

Option 2. Admission 
document 

Requirements to transfer from an SME Growth Market to a regulated 
market 
Create  a  lighter  "transfer  prospectus"  for  issuers  having  been  listed  a  certain 
amount of time on an SME Growth Market (e.g. 3 years) 
Require  an  admission  document  (not  approved  by  NCAs)  instead  of  a 
prospectus for companies that have been listed on an SME Growth Market for a 
certain amount of time (e.g. 3 years), 

Under Option 1, the issuers seeking to graduate from an SME Growth Market to the regulated 
market  would  have  to  produce  an  alleviated  prospectus,  compared  to  the  normal  regime 
where they have to prepare a full prospectus and incur all the costs this entails.  The 'transfer' 
prospectus would be available for use in cases of transfer from an SME Growth Market to a 
regulated market and  its content  would be alleviated compared to the normal prospectus. It 
would  be  based  on  the  existing  schedule  set  up for  the  simplified  prospectus  for secondary 
41 

 
 
 
 
 
 
 
 
 
 
 
issuances under the Prospectus Regulation. This would present several advantages compared 
to the current situation: (i) it would significantly reduce the amount of time and the costs for 
issuers, including external advisers' fees; (ii) it would thereby facilitate the transition from an 
SME  Growth  Market  to  a  regulated  market,  allowing  growing  companies  to  access  greater 
liquidity and gain enhanced visibility towards investors associated with the EU main markets;  
(iii)  it  would  also  help  to  make  the  'SME  Growth  Market'  brand  more  attractive  for  both 
issuers and stock-exchanges. An alleviated 'transfer' prospectus would facilitate the upgrade 
to regulated markets by companies that have exceeded the market capitalisation threshold of 
EUR 200 million and address the risk for the trading venue to lose its certification as an SME 
Growth  Market  (in  case  more  than  50%  of  listed  companies  would  exceed  the  EUR  200 
million threshold). Nevertheless, from an investor point of view, it could cause confusion that 
some issuers  admitted to  trading on a  regulated  market for the first time have  to  produce  a 
full prospectus while SMEs can publish an alleviated prospectus. This is why a condition to 
access to this 'transfer' prospectus would require issuers to have been admitted to trading on 
an SME Growth Market for at least 3 years. Indeed, it has been observed that SMEs generally 
move on to the regulated markets after a period of three years155. The alleviated prospectus 
would only apply after a period of three years to leave sufficient time for issuers to provide 
the  market  with  information  on  their  past  financial  performance  and  meet  the  reporting 
requirements under the rules of an SME Growth Market (MiFID II level 2). The cornerstone 
principle  under  the  Prospectus  regulation,  according  to  which  a  prospectus  has  to  be 
published  when  securities  are  offered  to  the  public  or  admitted  to  trading  on  a  regulated 
market,  would  therefore  still  be  respected.  Furthermore,  this  alleviated  prospectus  schedule 
would  remain  a  'niche'  product,  as  the  number  of  companies  that  currently  graduate  from 
SME-dedicated MTFs to the regulated market is relatively low156. 

Under  Option  2,  the  issuer  will  not  be  obliged  to  issue  a  prospectus,  but  would  instead  be 
required to draw up an admission document in accordance with the regulated market's listing 
rules.  This  document  would  not  constitute  a  prospectus  and  would  not  be  approved  by  a 
national competent authority. The regulated market rules would determine its content, as for 
existing  admission  documents.  This  option  would  present the  same  advantages  as  Option  1 
and would further reduce the costs faced when moving to the main market. However, the core 
principle  of  the  Prospectus  Regulation  (according  to  which  the  prospectus  publication 
obligation  is  triggered  when  securities  are  offered  to  the  public  or  admitted  to  trading  on  a 
regulated  market)  would  not  be  respected.  More  significantly,  the  lack  of  approval  by  a 
national  competent  authority  of  this  document  and  the  lack  of  harmonisation  of  its  content 
could cause investor confusion and damage the trust in the regulated market 'brand', as there 
would  be  no  prospectus  available  for  some  issuers.  Finally,  the  admission  to  trading  on  a 
regulated market imposes the obligation on issuers to produce financial statements according 
to IFRS. Except in few cases157, the listing rules of SME-dedicated MTFs do not require the 
mandatory publication of financial statements in IFRS, which means that a large number of 
potential  SME  Growth  Market  issuers  do  not  use  IFRS158.  The  absence  of  a  prospectus  by 

155 Except  on  AIM  Italy  where  the  graduation  takes  place  on  average  after  25  months,  such  a  move  to  the  main  market 
usually take place after three years (First North: 3 years; NewConnect: 3.17 years; MAB: 5 years, ESM: more than 5 years; 
AktieTorget: 8 years).  
156 Since 2006, there has been on average per year 19 issuers moving from SME-dedicated MTFs to EU regulated markets. 
Since 2016, there have been 226 companies graduating from the SME-dedicated MTFs to EU regulated markets. (Source: 
Data received from EU Securities exchanges and Commission data analysis – The MTFs included in this sample are: Dritter 
Markt, Euronext  Growth,  First North,  Scale,  EN.A,  ESM,  AIM Italy,  AIM  UK,  NewConnect,  AeRO,  BSSE MTF,  MAB, 
AktieTorget).  
157 Two SME-dedicated markets impose the use of IFRS: AIM in the UK and the Emerging Companies Market in Cyprus 
158 Feedback received during workshops organised by Commission services on barriers to SME listing in 2016 

42 

 
 
                                                 
issuers  for  which  no  financial  statement  in  IFRS  was  available  would  likely  increase 
investors' confusion. 

Given  the  impact  on  the  different  stakeholders  and  the  coherence  with  the  Prospectus 
Regulation, the preferred option is Option 1. 

      Objectives 

Objective 1 

Objective 2 

Objective 3 

EFFECTIVENESS 

EFFICIENCY 

(cost-
effectiveness) 

Coherence 

SCORE 

Enhance 
 liquidity 

Maintain 
market 
integrity 

Policy  
option  
1. Baseline scenario 
Option 1. Partial 
alleviation 
Option 2. 
Admission 
document 

Reduce 
compliance 
costs for SMEs 
0 

+ 

++ 

0 

≈ 

≈ 

0 

≈ 

- 

0 

+ 

+ 

0 

++ 

-  

0 

4 

1 

Magnitude  of  impact  as  compared  with  the  baseline  scenario  (the  baseline  is  indicated  as  0):  ++  strongly 
positive; + positive; – – strongly negative; – negative; ≈ marginal/neutral; ? uncertain; n.a. not applicable 

Impact on Stakeholders  

Issuers 

Investors 

Intermediaries / 
Market Makers 

Exchanges 

NCAs / 
Supervisors 

1. Baseline 
scenario 
Option  1.  Partial 
alleviation 
Option 
Admission 
document 

2. 

0 

↑ 

↑↑ 

0 

≈ 

↓ 

0 

≈ 

0 

0 

≈ or ↑ 

≈ or ↑ 

≈ or ↓ 

≈ or ↑ 

↓ 

6.2

Policy options concerning the SME Growth Market concept 

6.2.1

  SME Growth Market defining criteria and thresholds 

SME Growth Market Definition 

1. 

for 

  Unique 

Option 
definition of SMEs 
Option  2.  Debt 
issuer  
market  definition,  raised 
threshold 
equity 
issuers  and  raised  SME 
proportion 
Option 3. Alternative debt 
issuer    market  definition 
and  raised  threshold  for 
equity issuers 

Definition  of  SME 
equity issuers 

Definition  of  SME  debt-
only issuers 
Increase  the  thresholds  of  the  2003  recommendation 
definition to match the profile of SMEs today 
Define  an  SME  debt-only 
issuer  based  on  the  value 
of  the  issuance  (EUR  50 
million over one year) 

Raising the market 
capitalisation threshold 
for equity issuers from 
EUR 200 to EUR 500 
million 

Define an SME debt issuer 
based  on  the  value  of  its 
outstanding  bond 
issued 
(EUR 150 million) 

Proportion of SMEs 

Left  unchanged  (at 
least 50%) 
Raised 
least) 

to  75%  (at 

Left  unchanged  (at 
least 50%) 

Option  1  would  create  a  single  definition  for  SME  issuers  by  keeping  the  criteria  from  the 
2003  Recommendation  definition  while  raising  the  thresholds  it  sets.  While  the  number  of 

43 

 
 
   
  
 
 
 
 
 
 
 
employees could be set at 499 by reference to other sectorial legislation159, setting an average 
turnover160 and a balance sheet161 set at EUR 200 million would be likely to capture all the 
issuers  currently  listed on  the  SME-dedicated  MTFs.  A  single  definition  would  make  SME 
Growth Markets more understandable for investors, as they could rely on the fact that SMEs 
(either  issuing  debt  or  equity)  on  those  trading  venues  meet  the  same  set  of  criteria.  In 
principle, this modification of the SME definition should facilitate the registration of MTFs 
as SME Growth Markets. As the problem of the current definition for debt-only issuers lies in 
a too narrow coverage of too small companies, raising the thresholds would logically include 
more SMEs and should be more reflective of the actual market situation. For equity issuers, 
criteria based on the number of employees, total balance sheet and turnover are less likely to 
fluctuate  greatly  compared  to  a  market  capitalisation  criterion.  This  approach  was  put 
forward  by  a  number  of  respondents  to  the  public  consultation.  Nevertheless,  there  are 
several downsides to this option. First of all, it would be very difficult to evaluate the right 
balance sheet and turnover thresholds and their cumulative effects. This difficulty stands out 
very  clearly  from  the  responses  to  the  public  consultation.  Some  stakeholders  suggested 
raising  the  turnover  or  balance  sheet  thresholds  to  EUR  150  million,  while  others  were  in 
favour  of  going  as  far  as  EUR  500  million.  Furthermore,  the  three  criteria  can  vary 
considerably, depending on the industry in which the issuer operates. For exchanges, keeping 
track  of  those  different  thresholds  would  require  a  deeper  analysis  compared  to  a  market 
capitalisation  criterion.  Work  is  currently  being  led  by  the  Commission  to  revisit  the  2003 
Recommendation, and setting new thresholds that would be adapted to SME access to public 
markets  could  conflict  with  the  broader,  ongoing  work  on  what  an  SME  is.  This  is  all  the 
more true as the purpose of a new definition with regard to SME Growth Markets should be 
to target specifically the relevant population of SMEs, i.e. those in a position to access public 
markets  and  which  should  be  incentivised.  The  need  to  adopt  a  well-calibrated  approach 
specifically for market access purposes pleads in favour of a market-based definition. Under 
this option,  the proportion of SMEs on SME Growth Markets (at least 50%) would remain 
similar to the baseline.   

Option 2 would modify both the SME equity and debt-only issuer definitions, as those two 
types of issuers present very specific features and would require separate consideration. For 
SME debt-only issuers, the current definition would be replaced by a definition based on the 
value of issuances (EUR 50 million) over a period of 12 months. As for option 1, this would 
allow companies to qualify as SME debt-only issuers despite breaching the current thresholds 
in  terms  of  total  number  of  employees  (250),  annual  turnover  (EUR  50  million)  and,  most 
importantly, size of balance sheet (EUR 43 million). As a result, an increased number of debt 
issuers would qualify as SMEs. In turn, this would enable more bond markets to qualify as 
SME Growth Markets and issuers on these markets to benefit from the alleviated regulatory 
requirements. It would thus help to lower the administrative compliance costs faced by SME 
debt  issuers.  The  threshold  based  on  issuance  size  would  be  calibrated  to  ensure  that  only 
smaller issuers would qualify. An appropriate threshold, based on common issuance sizes of 

159 For instance, the EU Growth Prospectus is available to unlisted companies issuing less than EUR 20 million and with an 
average  number  of  employees  of  499.  Likewise,  the  Commission  Guidelines  on  State  aid  to  promote  risk  finance 
investments  (SWD(2014)6  and  SWD(2014)7)  define  a  midcap  as  'an  undertaking  whose  number  of  employees  does  not 
exceed 499'.    
160 The average turnover of companies listed on the EU SME MTF is the following: EN.A (135K€), NewConnect (800K€), 
MAB (EUR 9 million), Euronext Growth (EUR 20 million), First North (EUR 25 million), Scale (EUR 39 million) and ESM 
(EUR 126 million) (Source: Growth Markets in Europe – An overview of what is on offer) 
161 Anecdotal evidence from the Spanish Market shows that the typical SME issuer raises between EUR 20 and 80 million 
on  MARF.  On  average,  such  capital-raising  requires  a  balance  sheet  of  EUR  60-100  million  and  a  turnover  of  EUR  200 
million (Public consultation SME listing)  

44 

 
 
                                                 
SMEs and stakeholders’ feedback, appears to be around EUR 50 million over a period of 12 
months  (see  annex  12  for  more  details).  Given  the  costs  of  issuances162,  larger  companies 
would generally look to issue considerably larger sized bond packages. Also, they will often 
be  publicly  listed  companies  for  which  the  debt-only  issuer  definition  does  not  apply.  As 
such, there is little scope for regulatory arbitrage.  

Under  option  2,  the  market  capitalisation  threshold  for  equity  issuers  would  be raised  from 
EUR  200  million  to  EUR  500  million 163 .  This  would  be  combined  with  a  higher  SME 
percentage  requirement  (at  least  75%)  for  the  trading  venue  to  qualify  as  an  SME  Growth 
Market.  This  approach  would  align  the  SME  Growth  Market  definition  with  other  EU 
regulations (the ELTIFs regulation164 and the Prospectus Regulation165) that grant benefits to 
issuers with a market capitalisation below EUR 500 million. A raised threshold would also 
better reflect market realities, as issuers with a market capitalisation below EUR 500 million 
also  experience  liquidity  issues 166  and  can  face  difficulty  in  complying  with  regulatory 
requirements. Some respondents also mentioned that an issuer can easily exceed the EUR 200 
million  threshold,  as  a  result  of  subsequent  fund  raising,  acquisitions  or  organic  growth. 
While  valuation  of  SME  issuers  can  change  quickly  (due  to  innovative  technologies  or 
commercial breakthroughs), companies can still find themselves in a growth stage, requiring 
more  flexible  access  to  capital  provided  for  under  the  SME  Growth  Market  framework. 
Raising  the  threshold  would  also  enable  SME  Growth  Markets  to  attract  more  and  larger 
companies, with the potential to increase liquidity on those markets (due to larger free floats). 
Larger  issuers  would  also  increase  institutional  investors'  interest  in  SME  Growth  Market 
shares.  Under  this  option,  the  required  proportion  of  SMEs  would  be  raised  to  75%.  If  the 
market capitalisation threshold was raised to EUR 500 million, the proportion of SMEs could 
also  be  raised  to  avoid  any  regulatory  arbitrage  by  non-SME  issuers.  For  investors,  this 
higher proportion would also assert their image of SME Growth Market as 'SME growers', by 
allowing less non-SMEs to list. Raising the current 50% threshold also means that, as SMEs 
get bigger, fewer of them will be able to continue to be traded on SME Growth Market over 
time, incentivising some of the largest issuers to move to regulated markets167.  

However,  raising  the  market  capitalisation  threshold  is  not  fully  justified  at  the  current 
juncture:  First,  MTFs  that  are  seeking  a  registration  as  an  SME  Growth  Market  are  not 
struggling  with  the  current  definition.  Indeed,  the  vast  majority  of  MTFs  targeting  SMEs 
have issuers with an average market capitalisation far below EUR 200 million (see Figure 10 
below).    This  means  that  raising  this  threshold  to  EUR  500  million  would  not  allow  more 
MTFs  to  register  as  SME  Growth  Markets,  as  all  the  MTF  markets  across  the  EU  can 
currently fit into this definition168.   

162 The costs of an initial bond offering of less than EUR 10 million on Euronext Growth are estimated at between 2 and 5% 
of the proceeds (Source: Magazine des Directeurs Administratifs et financiers (July-August 2013); In the technical workshop 
on 'barriers on listing for SMEs' on 7/10/2016 and 08/12/2016, participants indicated that the costs of an SME bond issuance 
represents 2% of the proceeds.   
163 A third of the respondents to the public consultation were in favour of raising the threshold from EUR 200 to EUR 500 
million.  
164 The recent European Long-Term Investment Funds (ELTIFs) shall invest at least 70% of their money in certain type of 
assets among which SMEs listed on regulated market or MTFs and with a market capitalisation below EUR 500 million. 
165 The  alleviated  'EU  Growth  Prospectus',  created  by  the  revised  Prospectus  Regulation,  is  available  (beyond  SMEs)  to 
companies listed on an SME Growth Market with a market capitalisation up to EUR 500 million.   
166 Hardman & Co, "While AIM companies management ignore retail investors at their peril", 2015 
167 Public consultation SME listing; Public Consultation, SME Listing, Department of Legal Studies, Bocconi University 
168 Even for the Enterprises Securities Market (ESM) where the average capitalisation of issuers is above EUR 200 million, 
the current definition is not a problem as out of the 22 companies listed on this trading venue, 12 of them (i.e. more than 
50%) have a market capitalisation below EUR 200 million. 

45 

 
 
                                                 
Figure 10 – Average market capitalisation of companies listed on a selection of SME-dedicated MTFs  

Dritter 
Markt 
(AT) 

Euronext 
(FR, BE, 
PT) 

Start 
(CZ) 

First North 
(DK, EE, FI, 
LV, LT, SE) 

Scale 
(DE) 

EN.A 
(EL) 

ESM 
(IE) 

AIM 
(IT) 

New 
Connect 
(PL) 

AeRO 
(RO) 

MAB  
(ES) 

Aktie 
Torget 
(SE) 

2017 Average  
market cap 
(m€) 
Source: Data received from securities exchanges and Commission calculations 

146,
5 

227,
3 

49,7 

44,9 

65,1 

21,9 

8,4 

58,7 

5,7 

4,4 

103 

0,9 

AIM 
(UK) 

125,
8 

Raising  the  threshold  up  to  EUR  500  million  would  not  allow  more  SME  Growth  Market 
issuers to benefit from alleviations/benefits associated with the SME Growth Market status. 
The current benefits/alleviations provided by the Market Abuse Regulation and by CSDR are 
available for all  SME Growth Market issuers, irrespective of their size and the EU  Growth 
Prospectus is already available for SME Growth Market issuers with a market capitalisation 
threshold up to EUR 500 million. Therefore, raising the threshold to this amount would not 
extend the possibility to use this alleviated prospectus schedule to more companies. The only 
impact  of  a  raised  threshold  would  be  for  EuVECA  funds  (normally  dedicated  to  start-ups 
and  unlisted  companies)  that  are  only  allowed  to  invest  in  SMEs  listed  on  SME  Growth 
Markets (see annex 15). Likewise, raising the proportion of SMEs to 75% could have some 
downside  effects.  Reduced  access  to  SME  Growth  Markets  for  larger  issuers  could  be 
detrimental  to  market  liquidity  and  for  the  profitability  of  the  trading  venues.  A  higher 
threshold  would  also  reduce  the  flexibility  granted  to  companies  (when  they  cease  to  be 
SMEs) to remain listed on an SME Growth Market.  

Under Option 3, the market capitalisation threshold for equity issuers would be raised to EUR 
500  million,  like  under  option  2,  while  the  proportion  of  SMEs  needed  for  the  market  to 
qualify as an SME Growth Market would be unchanged (at 50%) compared to the baseline. A 
capitalisation  threshold  of  EUR  500  million  would  better  reflect  the  situation  of  European 
SMEs  (especially  in  the  larger  Member  States)  and  future  growth  prospects  of  companies 
listed  on  those  trading  venues,  while  granting  larger  companies  access  to  SME  Growth 
Markets  (up  to  49%)  might  be  beneficial  for  the  liquidity  and  profitability  of  the  trading 
venues.  Option  3  would  base  the  definition  of  debt-only  issuers  on  the  total  value  of 
outstanding debt. A non-equity issuer would qualify as SMEs provided that the outstanding 
nominal value of its debt securities does not exceed EUR 150 million. This threshold seems 
to  be  appropriate,  considering  the  average  nominal  value  of  outstanding  bond  issuance  per 
issuer  (See  figure  11).  This  solution  was  not  mentioned  by  respondents  to  the  public 
consultation but was considered by ESMA when producing its final report on MiFID II level 
2169. Compared to option 2, this solution would have the merit of strictly limiting the SME 
debt-only issuer definition: under this option, an issuer could not be considered an SME if it 
returns  to  the  market  several  times  and  raises  debt  capital  through  secondary  issuances.  A 
criterion based on outstanding debt issued would also draw a parallel with the criterion based 
on  market  capitalisation  used  for  SME  equity  issuers.  However,  this  option  presents  a 
drawback.  SMEs  in  financial  distress  may  exceed  the  threshold  involuntarily170.  Although 
their  business  should  qualify  as  an  SME,  they  would  drop  outside  of  the  definition  scope 
when  their  debt  levels  increase.  Should  this  happen  to  more  companies  on  the  market,  the 

169 ESMA's Technical Advice to the Commission on MiFID II and MiFIR – Final Report  
170 Distress  of  several  SME  bond  issuers  at  the  same  time  has  already  been  observed  on  the  German  SME  bond  Market. 
Source: OECD, Growth companies, Access to Capital Markets and Corporate Governance, 2015; Scope Ratings, Lessons 
Learned  in  the  German  SME  Bond  Market  (April  2015);  Scope  Ratings,  Scale  Replaces  Entry  Standard,  Will  this 
Rehabilitate SME Bond Financing? (2017) 

46 

 
 
 
                                                 
 
markets could lose their SME Growth Market status, thus limiting regulatory alleviations for 
their companies.   

Figure 11 – Average value of outstanding issuances per issuer per year 

Euronext (FR,BE) 
First North (Nordics, Baltics) 
Scale (DE) 
Stuttgart B (DE) 
EN.A (EL) 
AeRO (RO) 
MARF (ES) 
Total 

2012 
14.4 

72.7 

38.6 

2013 
27.1 
18.4 

73.9 

50.0 
40.9 

2014 
32.9 
25.1 

73.3 

45.5 
39.5 

2015 
44.6 
22.7 

75.0 

0.9 
49.0 
43.0 

2016 
75.4 
26.9 

90.0 

0.9 
55.5 
57.0 

2017 
85.9 
16.7 
64.3 
102.0 
10.0 
0.8 
53.5 
57.0 

           Objectives 

Objective 1 

Objective 2 

Objective 3 

EFFECTIVENESS 

EFFICIENCY 

(cost-
effectiveness) 

Coherence 

SCORE 

Reduce 
compliance 
costs for SMEs 
0 

+ 

+ 

+ 

Enhance 
 liquidity 

Maintain  market 
integrity 

0 

≈ 

0 

≈ 

≈ or - 

≈ or + 

0 

+ 

+ 

0 

≈ or - 

0 

1.5 

+ 

3 

≈ 

≈ 

+ 

≈ or + 

2.5 

Policy option  
Baseline scenario 
Option 1.     .  Unique 
definition of SMEs  
Option  2.  Debt  issuer 
definition, 
Market 
for 
raised 
equity issuer and raised 
SME proportion  
Option  3.  Alternative 
debt 
  market 
definition  and  raised 
threshold 
for  equity 
issuers 

threshold 

issuer 

Magnitude  of  impact  as  compared  with  the  baseline  scenario  (the  baseline  is  indicated  as  0):  ++  strongly 
positive; + positive; – – strongly negative; – negative; ≈ marginal/neutral; ? uncertain; n.a. not applicable 

Impact on Stakeholders  

Issuers 

Investors 

1.Baseline scenario 
Option 1Unique definition of 
SMEs  
Option  2.  Debt  issuer  Market 
definition, 
threshold 
raised 
for  equity  issuer  and  raised 
SME proportion 
Option 3.  
Alternative 
issuer  
market  definition  and  raised 
threshold for equity issuers  

debt 

0 

↑ 

↑ 

↑ 

0 

 ↑ 

↑  

↑ 

Intermediaries / 
Market Makers 
0 

≈ 

≈ 

≈ 

Exchanges 

NCAs / 
Supervisors 

0 

≈ or ↑ 

≈ 

≈ or ↓ 

≈ or ↑ 

≈ or ↑ 

≈ 

Evidence  shows  that  the  current  SME  debt-only  issuer  definition  based  on  the  2003 
Recommendation is not adapted to smaller companies issuing bonds. Raising the thresholds 
of the criteria set by this Recommendation would lead to a further fragmentation of the SME 
definition  across  EU  legislation.  A  market-oriented  definition  based  on  an  issuance  size 
criterion  (EUR  50  million  over  a  period  of  12  months)  would  be  better  adapted  to  the 

47 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
situation  of  small  bond  issuers  and  is  supported  by  a  significant  number  of  stakeholders. 
However, as regards equity issuers, raising the threshold up to EUR 500 million would have 
little impact in the medium term. It would not allow more MTFs to register as SME Growth 
Markets and hence not extend the potential benefits associated with the SME Growth Market 
issuer status to  more companies.  As this  change would not  bring clear benefits in the short 
run, the status quo seems a suitable option. Therefore, the preferred option is option 2 as 
regards  the  debt  issuer  definition.  The  other  aspects  of  this  option  (higher  market 
capitalisation threshold and higher proportion of SMEs) should be discarded.  

6.2.2

  Half-yearly report 

Option 1. Flexibility as regards 
non-equity issuers 
Option 2. Flexibility as regards 
non-equity and equity issuers  

Half yearly reports  
Allow SME Growth market operators to decide whether or not to apply 
an obligation for half-yearly reports to non-equity issuers  
Allow SME Growth market operators to decide whether or not to apply 
an obligation for half-yearly reports to equity and non-equity issuers  

Under Option 1, non-equity SME Growth Markets issuers could be exempted by their market 
operators  from  the  obligation  to  produce  a  half-yearly  report.  Some  stakeholders  have 
mentioned that the costs and constraints associated with the preparation and the publication 
of half-yearly reports can deter issuers from joining public markets. In some cases, they also 
face fees paid to accountants and auditors to fulfil this regulatory requirement. Furthermore, 
SME  Growth  Market  non-equity  issuers  would  be  set  at  a  disadvantage  compared  to  non-
equity issuers on a regulated market. Indeed, wholesale debt issuers (i.e. companies issuing 
bonds with a denomination per unit above EUR 100,000 that targets professional investors) 
on  regulated  markets  are  already  exempted  from  publishing  half-yearly  reports  (under  the 
Transparency  Directive) 171.  Therefore,  it  can  seem  paradoxical  to  impose  more  stringent 
requirements on SME Growth Market non-equity issuers than on those listed on a regulated 
market172.  This  requirement  can  also  deter  some  SME-dedicated  MTFs  specialised  in  bond 
issuances  to  seek  a  registration  as  an  SME  Growth  Market 173 .  Mandatory  half-yearly 
reporting  for  non-equity  issuers  is  seen  as  an  obstacle  to  the  take-up  of  the  SME  Growth 
Market label, as in some cases it might impose additional requirements on issuers instead of 
alleviating  their  regulatory  burden 174.  As  a  consequence,  more  discretion  regarding  half-
yearly reports for non-equity issuers can allow market operators to better adapt their listing 
rules  to  local  conditions.  However,  less  frequent  periodic  information  can  also  create  less 
investors' interest in SME bond issuances and generate less liquidity  – even if liquidity is a 
less  important  consideration  for  SME  bond  issuances,  as  such  bonds  are  usually  bought  by 
institutional investors following a 'buy-and-hold strategy' until maturity.  

Under Option 2, the market operators of SME Growth Markets would have the possibility to 
exempt both equity issuers and non-equity from the obligation to publish half-yearly reports. 
Equity  issuers  spend  time  and  money  to  prepare  and  publish  half-yearly  reports.  This 
reporting in semi-annual intervals is burdensome for issuers and can also create an inclination 

171  Under  Article  8(1)(b)  of  the  Transparency  Directive  2004/109/EC,,  issuers  of  wholesale  debt  securities  (with  a 
denomination per unit above EUR 100,000) that are admitted to a EU regulated market are exempt from the  obligation to 
publish annual and half-yearly  reports. 
172 Recital 112 of the Delegated Regulation 2017/565 provides that  'In any case, an SME Growth market should not have 
rules that impose greater burdens on issuers than those applicable to issuers on regulated markets'.  
173 This argument was mentioned by two exchanges during the Commission technical workshop held on 14 November 2017 
174 For instance, two SME-dedicated markets (EXTRA-MOT PRO in IT and MARF in ES) specialised in bonds and three 
SME-dedicated  markets  (Euronext  Growth  in  BE,  FR  and  PT)  specialised  both  in  bonds  and  shares  do  not  require  half-
yearly reports for non-equity issuers.  

48 

 
 
 
 
                                                 
of investors towards short-termism. The requirement for equity issuers to produce half-yearly 
reports  could  also  prevent  some  SME-dedicated  MTFs  from  seeking  a  registration  as  SME 
Growth Markets, as some of them do not currently impose such a requirement175. Flexibility 
for  market  operators  to  impose  or  not  a  half-yearly  report  would  also  help  them  to  tailor 
listing rules to local investors' and issuers' needs. However, many respondents have indicated 
that  the  publication  of  financial  results  by  equity  issuers  is  the  main  driver  of  investors' 
decisions.  The  timely  issuance  of  financial  reports  would  be  fundamental  to  foster  investor 
confidence and to  attract investors (especially institutional investors) and financial analysts' 
interest. The publication of half-yearly report can also enhance the liquidity of SME shares. 
The  absence  of  frequent  financial  reporting  is  also  likely  to  increase  the  risks  of  insider 
trading.  

           Objectives 

Objective 1 

Objective 2 

Objective 3 

EFFECTIVENESS 

Policy  
option  
1. Baseline scenario 
Option 1.     
Flexibility as regards 
non-equity issuers 
Option 2.     
Flexibility as regards 
non-equity and 
equity issuers 

Reduce 
compliance 
costs for SMEs 

Enhance 
 liquidity 

Maintain 
market 
integrity 

0 

+ 

++ 

0 

≈ 

-  

0 

≈ 

- 

EFFICIENCY 

(cost-
effectiveness) 

Coherence 

SCORE 

0 

+ 

0 

++ 

++ 

- 

0 

4 

1 

Magnitude  of  impact  as  compared  with  the  baseline  scenario  (the  baseline  is  indicated  as  0):  ++  strongly 
positive; + positive; – – strongly negative; – negative; ≈ marginal/neutral; ? uncertain; n.a. not applicable 

Impact on Stakeholders  

Issuers 

Investors 

1. Baseline scenario 
Option  1.  Flexibility 
as  regards  non-equity 
issuers  
Option  2.  Flexibility 
as  regards  non-equity 
and equity issuers 

0 

↑ 

↑ 

Intermediaries / 
Market Makers 
0 

≈ 

0 

≈ or ↓ 

↓↓ 

≈ or ↓ 

Exchanges 

0 

↑ 

↑ 

NCAs / 
Supervisors 
0 

≈ 

≈ 

As the obligation to produce a half-yearly report would impose a more stringent requirement 
on  SME  Growth  Market  non-equity  issuers  compared  to  non-equity  issuers  on  regulated 
markets, it seems  justified  to  leave the flexibility to  market operators whether to  require or 
not  the  publication  of  such  reports.  However, half-yearly report  provides  a  valuable  insight 
into  the  performance  of  equity  issuers  and  the  removal  of  this  requirement  may  deter 
investors  from  investing  in  SME  Growth  Market  issuers  due  to  the  lack  of  sufficiently 
detailed  and  fresh  financial  data.  It  could  also  have  a  downward  impact  on  liquidity.  As  a 
consequence, the obligation of half-yearly reports for equity issuers should not be left to the 
discretion of the trading venue. Therefore, the preferred approach is option 1.     

175 For example, Dritter Market (AT) and the MTF operated by the Bratislava Stock Exchange do not require the publication 
of a half-yearly report by equity issuers.   

49 

 
 
 
  
 
 
 
 
                                                 
6.3

Policy options to address liquidity in SME Growth Markets 

Option 1. 29th 
regime + free 
float 
Option 2.  
Full 
harmonisation 

Liquidity contracts  
Create  a  European  regime  for  liquidity  contracts, 
while  authorising  NCAs  to  submit  an  AMP  and 
develop a parallel regime tailored to local conditions.   
Create  a  fully  harmonised  EU  liquidity  provision 
scheme  with  all  conditions  set  out  at  EU  level, 
without  the  possibility  for  NCAs  to  submit  an  AMP 
tailored to local conditions.  

Free float requirements 
Oblige  SME  GMs  to  impose  a 
free float requirement but provide 
flexibility on exact criteria   
Impose  precise  free  float  criteria 
for SME GMs 

Both  option  1  and  2  would  seek  to  increase  liquidity  on  SME  Growth  Markets,  by 
introducing  a  more  harmonised  EU  approach  towards  on  the  one  hand,  liquidity  contracts, 
and  on  the  other,  free  float  requirements.  Authorising  liquidity  contracts  in  all  Member 
States, together with setting a minimum free float (thereby sending to investors the signal that 
SME GM shares are not illiquid on admission), can be expected to have a cumulative positive 
effect, with the two measures reinforcing each other in stimulating liquidity on SME Growth 
Markets.  

Both options would create a European regime for SME Growth Markets that would set out 
the  conditions  that  these  contracts  need  to  fulfil.  This  would  enable  SME  Growth  Market 
issuers  to  enter  into  liquidity  contracts  in  all  Member  States,  regardless  of  whether  their 
national  competent  authority  has  established  an  accepted  market  practice.  As  under  current 
accepted market practice regimes, the European regime would be carefully designed so as to 
prevent  the  liquidity  provider  from  giving  any  false  or  misleading  signal  to  the  market  or 
distort the pricing of the respective share. Several respondents to the public consultation also 
highlighted that authorising liquidity contracts across the EU would align market conditions 
and  opportunities  in  all  Member  States,  thus  also  contributing  to  fair  competition  between 
markets.  Liquidity  contracts  provide  an  attractive  alternative  given  the  absence  of  such 
schemes.  Research  has  shown  that  liquidity  contracts  have  a  direct  positive  impact  on 
liquidity176 and  that  higher  liquidity lowers  the  cost  of  capital  for  issuers177.  Furthermore, a 
study of French liquidity contracts specifically showed that volatility is reduced by more than 
25%  for  companies  with  free  floats  of  less  than  EUR 200 million  and  10%  for  free  floats 
between EUR 200 million and EUR 5 billion178. This increased liquidity and lower volatility 
would  ultimately  benefit  investors:  it  would  increase  the  value  of  a  company’s  stock 179, 
reduce  transaction  costs  and  enable  investors  to  trade  in  and  out  of  their  positions  more 
easily180.  Although  the  Netherlands  abandoned  their  accepted  market  practice  on  liquidity 
contracts  due  to  low  uptake181,  other  Member  States  have  seen  a  significant  interest  from 
issuers (e.g. France where two-thirds of the 175 companies listed on Euronext’s SME MTF in 
2015 had signed a liquidity contract182).  

Turning  to  free  float,  both  options  would  impose  some  form  of  minimum  requirement.  A 
minimum free float would have a positive impact on the level of liquidity, especially at the 

176 Why do ﬁrms pay for liquidity provision in limit order markets?, J. Skjeltorp, B. A. Ødegaard, April 2010 
177 See  for  instance  the  literature  review  presented  in  Why  do  listed  ﬁrms  pay  for  market  making  in  their  own  stock?,  J. 
Skjeltorp, B. A. Ødegaard, March 2013 
178 AMAFI, Mise en œuvre de MAR, Révision de la pratique de marché admise AMF concernant les contrats de liquidité, 23 
August 2017 
179 Why do ﬁrms pay for liquidity provision in limit order markets?, J. Skjeltorp, B. A. Ødegaard, April 2010 
180 ESMA  Opinion  On  Intended  Accepted  Market  Practice  on  liquidity  contracts  notified  by  the  Comisión  Nacional  del 
Mercado de Valores, ESMA/2016/1663, December 2016 
181 AFM Website: https://www.afm.nl/nl-nl/nieuws/2017/sep/beeindigen-amp 
182 Rapport annuel 2015, Observatoire du financement des entreprises par le marché, p.23 

50 

 
 
 
                                                 
 
admission stage. There are some indications of a positive correlation between the level of free 
float  and  liquidity,  as  well  as  that  a  higher  free  float  percentage  can  help  to  mitigate  acute 
liquidity shortages183. A minimum level of free float  would ensure that a certain amount of 
shares will be held by retail investors who play a crucial role in providing daily liquidity184. 
In addition, some investor representatives mentioned in the public consultation that too low 
levels  of  free  float  prevented  most  institutional  investors  from  investing  in  certain  asset 
classes.  It  should  be  noted,  however,  that  a  minimum  free  float  requirement  may  also  hold 
potential downsides. In particular, it is possible that some SMEs may become more reluctant 
to raise capital via public share offerings185 as it implies that the owners will need to sell at 
least this minimum percentage  to the  public. This  can  raise fears  for the initial  owners that 
they  may  lose  control  of  the  business  to  new  shareholders186.  Nevertheless,  the  purpose  of 
public  markets  should  not  be  to  list  illiquid  issuers  on  admission.  In  addition,  the  large 
majority  of  SME  Growth  Markets  already  impose  some  form  of  minimum  free  float 
requirements,  while  those  that  currently  do  not  impose  any  free  float  requirements  have  on 
average  relatively  high  levels  of  free  float,  again  implying  that  only  few  issuers  would  be 
affected by minimum requirements. 

Option 1: 29th regime + free float 

Concerning liquidity contracts, option 1 would create a European regime (a ‘29th regime’) but 
would  still  allow  national  competent  authorities  to  establish  accepted  market  practices  s187. 
Likewise,  already-approved  accepted  market  practices  could  be  maintained  after  the  new 
regime  is  established.  This  approach  would  provide  national  competent  authorities  with 
enough flexibility to tailor liquidity contracts to local conditions and market specificities (e.g. 
extension of the scope to illiquid shares on a regulated market).  This reflects the responses of 
the  majority  of  participants  to  the  public  consultation,  who  argued  greatly  in  favour  of 
enabling  liquidity  contracts  while  ensuring  some  flexibility  at  national  level.  In  addition,  it 
would limit the costs arising for both issuers and national competent authorities, as already-
adopted  accepted  market  practices  and  liquidity  contracts  entered  into  could  be  preserved. 
Nevertheless,  allowing  divergences  through  national  accepted  market  practices  would  also 
mean  that  some  level  of  market  fragmentation  in  the  European  Union  would  remain. 
Accepted market practices adopted beyond the European regime under option 1 may distort, 
to some extent, the respective attractiveness of listings in different Member States. However, 
given  that  ESMA  would  still  need  to  approve  any  accepted  market  practice  submitted  by 
national competent authorities, measures could be taken at this level to avoid any disruptive 
effect.  

On  free  float,  option  1  would  grant  market  operators  the  flexibility  to  freely  decide  on  the 
level  and  nature  of  the  requirement  that  they  wish  to  impose.  Approximately  half  of  the 
stakeholders  who  expressed  an  opinion  on  free  float  through  to  the  public  consultation 
favoured this flexible approach. As could be expected, issuer representatives were against any 
rule on free float, while investor representatives were all in favour of imposing a minimum to 
be  defined  by  local  markets188.  As  there  would  be  full  flexibility  as  to  the  level  imposed, 
nothing  would  change  for  the  companies  listed  on  the  exchanges  already  requiring  a  free 

183 X. Ding, Y. Ni, L.Zhong, Free float and market liquidity around the world, Journal of Empirical Finance, 2015 
184 Hardman & Co, "While AIM companies management ignore retail investors at their peril", 2015 
185 This view was conveyed in the public consultation by several issuer representatives 
186 OECD, New Approaches to SME and Entrepreneurship financing: Broadening the range of Instruments, p.99 
187 For instance, NCAs will have the possibility to adopt an AMP on liquidity contracts for companies that are not listed on 
an SME Growth Market.  
188 Other types of stakeholders (exchanges, public authorities, industry associations) had split views on the issue. 

51 

 
 
                                                 
float,  or  for  the  market  operators.  As  pointed  out  in  a  few  responses  to  the  public 
consultation, another advantage to leaving flexibility to market operators lies in the fact that 
free float can be defined and measured differently in different Member States189. However, a 
fully  flexible  approach  runs  the  risk  that  market  operators  set  a  very  low  free  float 
requirement which may not bring any real positive impacts. To mitigate this issue, national 
competent  authorities  would  need  to  verify  that  market  operators  have  not  imposed 
excessively low thresholds. 

Option 2: full harmonisation  

In difference to option 1, option 2 would adopt a maximum harmonisation approach. A fully 
harmonised  European  liquidity  provision  framework  would  be  created,  without  allowing 
national  competent  authorities  to  establish  further  accepted  market  practices.  This  would 
increase  the  legal  certainty  for  both  issuers  and  financial  intermediaries  responsible  for 
providing  liquidity  compared  to  option  1,  especially  in  terms  of  the  set  limitations  to  their 
contractual  relationship.  As  all  requirements  would  be  fully  harmonised,  liquidity  could  be 
provided  across  all  exchanges  without  regard  for  potential  national  divergences 190 ,  thus 
preventing  any  potential  fragmentation  across  Member  States  in  terms  of  the  allowed 
practices.  

With regard to the free float requirement, option 2 would set the minimum level in EU law. 
As pointed out by some stakeholders through the public consultation, this would send a clear 
signal  to  investors  that  SME  Growth  Markets  aspire  to  be  liquid  markets,  and  would 
contribute to increasing investor confidence more strongly.  

However,  it  should  be  noted  that  this  maximal  approach  of  setting  uniform,  more  rigid 
requirements  may  not  necessarily  be  suitable  for  every  SME  Growth  Market.  The 
characteristics of liquidity provision or minimum free float could not be further calibrated to 
best  suit  local  conditions.  This  may  work  to  the  detriment  of  Member  States  with  less 
developed  capital  markets  in  particular.  Given  even  more  pronounced  issues  of  liquidity  in 
these  Member  States,  they  may  notably  want  to  adopt  accepted  market  practices  to  further 
facilitate liquidity contracts. Regarding free float, while investor confidence may be boosted 
more clearly than under option 1, there may be certain unforeseen impacts depending on the 
respective  nature  of  SME  Growth  Markets,  their  ecosystem,  and  the  national  definition  of 
free  float.  These  potentially  significant  shortcomings  were  clearly  reflected  in  the  public 
consultation,  as  almost  none  of  the  respondents  favoured  setting  the  characteristics  of  free 
float requirements or liquidity contracts at EU level.  

EFFECTIVENESS 

      Objectives 

Objective 1 

Objective 2 

Objective 3 

Policy 
 option  
Baseline scenario 
Option 1.  
29th  regime  +  free 
float 

Reduce 
compliance 
costs for SMEs 
0 

≈ 

Enhance 
 liquidity 

0 

++ 

Maintain 
market 
integrity 
0 

≈ 

EFFICIENCY 

(cost-
effectiveness) 

Coherence 

SCORE 

0 

≈ 

0 

≈ 

0 

2 

189 For instance, free float can be expressed as a percentage of an issuer’s total capital, a fixed amount of capital, a number of 
shareholders or an absolute monetary value.  
190 It should be noted though that the same would be possible under option 1, provided that the actors rely on the European 
regime. 

52 

 
 
 
  
 
 
 
                                                 
Option 2.  
Full harmonisation 

≈ 

++ 

≈ 

≈ or - 

≈ 

1.5 

Magnitude  of  impact  as  compared  with  the  baseline  scenario  (the  baseline  is  indicated  as  0):  ++  strongly 
positive; + positive; – – strongly negative; – negative; ≈ marginal/neutral; ? uncertain; n.a. not applicable 

Impact on Stakeholders  

1. 

Baseline scenario 
Option 
regime + free float 
Option 
harmonisation 

2. 

29th 

Full 

Issuers 

Investors 

Intermediaries / 
Market Makers 

Exchanges 

NCAs/ 
Supervisors 

0 

↑ 

≈ or ↑ 

0 

↑/↑↑ 

↑/↑↑ 

0 

↑/↑↑ 

↑/↑↑ 

0 

≈ 

 ≈ or ↓ 

0 

≈ 

≈  

Given that option 1 would couple the benefits of enabling all European SME Growth Market 
issuers  to  enter  into  liquidity  contracts,  while  minimising  cost  implications  for  issuers, 
intermediaries  and  national  competent  authorities,  and  guaranteeing  greater  impact  through 
more  tailored  regimes,  this  option  represents  the  preferred  approach.  This  also  reflects  the 
responses  of  the  majority  of  participants  to  the  public  consultation.  Any  potential  issues  of 
market  fragmentation  that  may  arise  under  option  1  could  furthermore  be  tackled  by 
respective guidelines and decisions taken by ESMA. 

7

  PREFERRED OPTION 

7.1

  Overall impact of the preferred option 

The  preferred  option  (summarised  in  the  table  below)  will  contribute  to  the  overarching 
Capital Markets Union goal to facilitate a better access to capital markets for companies and 
reduce  the  reliance  on  bank  financing.  In  particular,  they  will  support  companies  listed  on 
SME Growth Markets by reducing their administrative burdens, re-aligning the definition of 
SME debt issuers with current market practices and enabling improved liquidity provision. 

It should be noted that, taken together, the regulatory measures included in this initiative may 
not  have  an  overwhelming  impact  on  the  situation  of  small  issuers  or  SMEs  considering  a 
listing. However, this proposal will create a more conducive regulatory environment for small 
companies, by making the SME Growth Market concept created by MiFID II more attractive, 
both  for  issuers  and  investors.  It  will  complete  the  regulatory  alleviations  already  provided 
for  under  the  Prospectus  Regulation  (such  as  the  alleviated  EU  Growth  Prospectus  and  the 
alleviated  prospectus  schedule  for  secondary  issuances)  and  the  Central  Securities 
Depositories Regulation (i.e. the extended buy-in periods for SME Growth Market financial 
instruments).  This  initiative  should  also  be  considered  in  a  broader  context.  The  Capital 
Markets  Union  Mid-term  Review  also  includes  non-legislative  measures,  such  as  the 
possibility  to  use  EU  public  funds  to  catalyse  private  investments  in  SME  Growth  Market 
shares.  The Commission  has  also  committed  to conducting a  study  analysing  the impact  of 
MiFID II research payment provisions on SME research coverage, which was perceived as a 
major regulatory obstacle to SME listing by a significant number of respondents to the public 
consultation. 

The technical adjustments under the Market Abuse Regulation will reduce the administrative 
burden of listing on SME Growth Markets. This will initially benefit companies already listed 
on  an  SME  Growth  Market.  It  is  estimated  that  the  annual  cost  savings  resulting  from  the 
envisioned adjustments under the Market Abuse Regulation will lie in the range of EUR 5.1 – 

53 

 
 
 
12.61 million191. Given the alleviated administrative burden and reduced costs (especially on-
going  costs),  it  will  also  contribute  to  making  listings  more  attractive  for  companies 
considering  that  route.  The  regulatory  adjustment  to  the  market  sounding  regime  for  the 
private  placements  of  bonds  with  institutional  investors  will  also  make  this  source  of 
financing  more  enticing.  The  targeted  changes  to  the  Market  Abuse  Regulation  framework 
for  SME  Growth  Market  issuers  have  been  carefully  considered  in  order  to  ensure  a  high 
level of investor confidence and market integrity.  The preferred options hold the significant 
advantage  of  not  reducing  market  integrity  nor  investor  confidence.  Investor  confidence 
largely depends on the amount of information disclosed to the market. The preferred options 
have  precisely  no  impact  on  the  quantity  (or  quality)  of  information  investors  would  have 
access to (except for the fact that debt-only issuers would be exempted from producing half-
yearly reports, in order to level the playing-field with regulated markets where requirements 
are paradoxically less stringent). For instance,  insider  lists are not  made public, and nor  do 
investors  know  about  delays  in  disclosing  inside  information.  The  proposed  changes  to  the 
Market  Abuse  Regulation  only  concern  administrative  procedures  and  the  distribution  of 
burden between issuers and National Competent Authorities, and not the level of information 
transmitted  to  the  market  or  the  national  competent  authority.  In  addition,  the  preferred 
options  do not  limit  the  capacity  of  competent authorities to  investigate  or  identify  risks  of 
market  abuse.  In  short,  none  of  the  adjustments  result  in  deconstructing  the  market  abuse 
regime.  

The  alleviated  transfer  prospectus  will  lower  the  costs  of  moving  from  an  SME  Growth 
Market to a regulated market. Regulated markets provide a range of advantages, in particular 
increased liquidity and access to deeper capital pockets. However, high compliance costs to 
access those trading venues act as a deterrent to move to them. The 'transfer prospectus' will 
lower  these  cost  barriers  in  the  transition  phase  and  encourage  the  graduation  of  issuers  to 
regulated markets. Initial listings on SME Growth Markets will also become more attractive 
if there is a less costly growth path to the main markets. By allowing successful companies to 
graduate easily to the main markets, the transfer prospectus will also assert the image of SME 
Growth Markets as “SME-growers” (instead of being perceived as 'end-markets'). Given the 
current  average  number  of  uplistings  per  year,  the  transfer  prospectus  is  estimated  to  bring 
about annual cost savings in the range of EUR 4.8 – 7.2 million.    

Furthermore, the change of SME debt-only issuer definition as well as the related deletion of 
the  requirement  to  publish  half-yearly  reports  will  enable  a  larger  number  of  MTFs 
(specialised  in  bonds  or  having  both  bond  and  share  offerings)  to  register  as  SME  Growth 
Markets.  As  a  result,  issuers  on  these  MTFs  will  benefit  from  the  existing  alleviations  for 
Growth Market issuers as well as the additional ones envisaged under the preferred option.         

Lastly,  the  envisioned  measures  on  liquidity  will  aid  both  issuers  and  investors  on  SME 
Growth Markets. Creating a European regime for liquidity contracts will facilitate issuers to 
enter  into  such  contracts.  This  will  ensure  a  minimum  level  of  liquidity  in  their  shares, 
thereby increasing the attractiveness also for investors. In the absence of a minimum level of 
liquidity and free float, many investors may not even consider investing in SME shares and 
bonds. Minimum liquidity levels thereby not only help to reduce liquidity and volatility risks 
for  investors  but  also  to  attract  further  liquidity.  Issuers  will  also  benefit  from  greater 
liquidity to the extent that it results in a higher pricing of their securities and increases their 

191 These  figures  do  not  account  for  additional  cost  savings  related  to  the  extended    deadline  for  issuers  to 
publicly disclose transactions relative to the notification by PDMRs and PCA (see Annex 3)   

54 

 
 
                                                 
capacity to raise capital in the future, by reducing the illiquidity premium they would have to 
pay otherwise.  

However, the positive impacts of this initiative should not be overstated. Other factors such 
as the current state of the market (both the market(s) serviced as well as financial markets), 
monetary  policy,  tax  treatment  of  debt  and  equity  and  general  preferences  of  financing 
channels  of  companies  will  generally  outweigh  the  impacts  of  the  regulatory  adjustments 
envisioned. As such, the preferred options are not expected to strongly impact the financing 
decision  of  businesses  in  the  short  run.  Companies  financing  decisions  are  usually  taken 
months  in  advance,  meaning  that  the  impacts  will  only  manifest  themselves  over  time  and 
when combined with other measures to enhance SME access to public market funding. The 
wider set of measures will require time before the increased relative attractiveness of capital 
based financing is fully perceived by companies and the positive impacts fully unfold. In the 
long  run,  however,  the  adjustments  are  expected  to  produce  noticeable  benefits,  in 
conjunction with other regulatory or non-regulatory actions foreseen. 

Eventually, the risk that the proposed changes would disrupt the markets through too frequent 
regulatory changes should be limited. First of all, the preferred options improve the overall 
situation  of  market  participants  essentially  through  alleviations,  which  should  be  less 
disruptive  than  a  situation  where  additional  requirements  are  introduced.  In  addition,  this 
initiative  is  the  only  regulatory  one  in  the  SME  listing  package.  As  such,  no  further 
legislative changes to the SME Growth Market will be proposed or implemented in the short 
- to medium-term. Without pre-empting the results of the MAR Review (scheduled for next 
year),  the  latter  will  be  of  a  much  broader  scope  and  should  not  further  amend  the  SME 
Growth  Market  framework.  With  regard  to  MiFID  II  and  the  Prospectus  Regulation,  their 
respective mandatory reviews are scheduled at a later stage (mid-2020 for MiFID II and July 
2022  for  the  Prospectus  Regulation).  Only  the  study  analysing  the  impact  of  the  MiFID  II 
level  2  on  SME  equity  and  bond  research  coverage  could  theoretically  result  in  further 
regulatory  changes  to  the  SME  Growth  Market  framework.  However,  even  if  legislative 
amendments  were  to  be  envisaged,  such  changes  would  not  be  proposed  under  the  current 
Commission, as the call for tender will be launched in Q2 2018, for a deliverable expected in 
Q2 2019 at the earliest. 

The preferred options are as follows: 

Problem drivers 

Administrative 
burden placed on 
listed SMEs  
(Driver 1) 

Figure 12 – Summary of the preferred options 
Preferred option 

Option  2  as  regards  MAR  (with  one  limitation): (i) Adoption  of a 
new deadline to publicly disclose managers' transactions (2 days as of 
the  manager’s  notification  to  the  issuer);  (ii)  list  of  'permanent 
insiders';  (iii)  justification  of  delayed  inside  information  only  on 
request (plus  no need  to keep  a disclosure record); (iv)  Exemption of 
private  placements  of  bonds  from  the  market  sounding  regime  if  an 
alternative wall-crossing procedure is in place.   
Option  2  as  regards  the  scope  of  alleviations  under  MAR  –  
Alleviations  under  MAR  are  granted  to  all  SME  Growth  Market 
issuers 
Option  1  as  regards  the  Prospectus  Regulation/transfer  of  listing 
from an SME Growth Market to a regulated market  - Creation of 
a  lighter  'transfer  prospectus'  for  SME  Growth  Markets  issuers  listed 
for at least three years  

55 

 
 
Inadequate SME 
Growth Market 
definition  
(Driver 2) 

schemes 
Lack  of 
to 
(mechanisms) 
promote  trading  and 
liquidity  on  SME 
Growth 
Markets 
(Driver 3) 

Option  as  regards  the  SME  Growth  Market  definition: Define an 
SME  debt-only  issuer  based  on  the  value  of  the  issuance  (50  million 
over one year) 
Option  as  regards  half-yearly  report  – Allow SME Growth Market 
operators  to  decide  whether  or  not  to  apply  an  obligation  for  half-
yearly reports to debt-only issuers 
Option  1:  (i)  Creation  of  a  European  regime  for  liquidity  contracts, 
while  authorising  NCAs  to  submit  an  AMP  and  develop  a  parallel 
regime tailored to local conditions; (ii) Oblige SME Growth Markets to 
impose a free float requirement but provide flexibility on exact criteria 

7.2

  Macro-economic impacts  

The initiative forms part of the wider Capital Markets Union programme aimed at facilitating 
a better access to capital markets for companies and reduce the reliance on bank financing. 
Various economic studies have shown that there  is a positive association between access to 
capital  markets  and  economic  growth.  More  so,  it  has  been  demonstrated  that  this 
relationship  is  causal  and  that  access  to  capital  markets  directly  impacts  the  ability  of  an 
economy to generate economic growth192. Improved access not only increases the capacity of 
companies to raise finance resources but also increases the efficiency of capital markets. This 
improves the overall allocation of capital, which will foster economic growth by utilising the 
available  capital  resources  more  efficiently.  For  instance,  companies  that  listed  their  shares 
on AIM in the UK (one of the few successful European junior markets for SMEs) show on 
average a turnover growth of 43% in the year after their IPO193.  

More diversified funding sources also increase economic resilience. Greater access to capital 
markets  will  help  to  mitigate  potential  problems  in  the  banking  sector.  The  financial  crisis 
demonstrated that an overly strong reliance on bank-based financing can severely undermine 
the  potential  for  a  quick  recovery.  The  much  more  rapid  economic  recovery  in  the  US 
compared the EU following the crisis is attributable, in part, to a greater proportion of capital 
market-based financing. As banks were hit by both an internal need to deleverage as well as 
increased regulatory constraints, their willingness to lend was strongly hampered. This made 
it  very  difficult  for  companies  to  raised  financial  resources,  especially  SMEs  as  they 
generally exhibit a higher exposure to risk for potential lenders.  

SMEs  form  the  backbone  of  the  EU  economy.  Not  only  do  they  represent  99%  of  all  EU 
businesses, but they also provide two-thirds of total private sector employment. As such, it is 
crucial  for  the  overall  health  of  the  economy  to  enable  these  companies  to  access  financial 
resources. While the latest two ECB Surveys on the Access to Finance of Enterprises (SAFE) 
indicate  a  higher  willingness  of  banks  to  provide  credit  to  SME's,  they  remain  overly 
dependent  on  bank  financing,  especially  from  smaller  domestic  banks.  This  makes  them 
considerably more vulnerable to economic shocks.  

The measures put forward in the preferred option, in conjunction with other CMU measures, 
will aid SMEs to diversify their sources of funding and thereby increase the EU's economic 
resilience.  In  particular,  it  will  help  young  innovative  firms  who  play  a  critical  role  for 

192 See Kaserer & Rapp et al., 2014 
193 Grant Thornton, the Economic Impact of AIM, 2015, p.5   

56 

 
 
                                                 
economic development. These companies are generally more dependent on equity financing 
as  they  often  lack  access  to  bank  lending,  given  higher  and  less  foreseeable  risk  factors. 
Overall, the initiative will help to facilitate stronger and more resilient economic growth, job 
creation as well as innovation.  

7.3

Small and medium-sized enterprises  

The amendments considered in the preferred option have the objective of facilitating capital-
raising  by  SMEs  on  public  markets  through  shares  or  bonds  issuances.  The  envisaged 
regulatory  adjustments  will  reduce  the  administrative  cost  burden  placed  on  SMEs  when 
listing  on  SME  Growth  Markets.  In  addition,  SMEs  will  benefit  from  improved  liquidity 
levels  in  their  shares.  This  will  make  investments  in  their  shares  more  attractive,  thus 
enabling  them  to  raise  more  capital  via  secondary  offerings.  The  amendments  will  initially 
benefit already listed SMEs. However, by lowering the cost barriers to access public markets, 
they will also benefit SMEs that seek to potentially list shares or issue bonds in the future. As 
the relative attractiveness of capital markets will be increased, the measures (in conjunction 
with other measures to support SME listing) may also have a small positive impact on bank 
based financing for SMEs, given competition between the two financing channels.    

7.4

UK leaving the EU 

The prospective withdrawal of the UK from the European Union is likely to have an impact 
on the composition of EU capital markets, including SME focused MTFs. In terms of market 
capitalisation,  the  London  Stock  Exchange  (LSE)'s  Alternative  Investment  Market  (AIM) 
represents  more  than  65%  of  the  overall  European  market  capitalisation  of  SME-focused 
MTFs. 74% of all proceeds on SME equity markets have been raised on AIM since 2006. In 
addition,  two  out  of  three  MTFs  registered  as  SME  Growth  Markets  under  the  Markets  in 
Financial Instruments Directive II are established in the UK (AIM and NEX).  

The  impact  of  the  UK's  withdrawal  on  SME  markets  should  not  be  overstated.  The  SME 
market  landscape  is  rather  fragmented  with  almost  one  SME  MTF  per  Member  State.  The 
majority  of  SME  issuers  are  local  in  nature  and  are  ill-equipped  for  a  listing  on  a  trading 
venue  located  outside  their  Member  States  of  origin.  Few  companies  are  dual-listed  due  to 
the costs that such a decision may imply. In addition, few SMEs are producing their financial 
statements  in  IFRS,  making  them  less  attractive  for  both  foreign  investors  and  financial 
analysts (see Annex 5 on out-of-scope drivers).   

AIM's higher level of liquidity (compared to the other EU SME markets except First North in 
the Nordics) could however attract some high-growth companies or some SMEs operating in 
specific sectors (such as biotech companies) that are better prepared for a listing outside their 
Member  States  and  that  are  ready  to  produce  their  financial  statements  in  IFRS  (which  is 
required by the AIM UK's listing rules). As issuers listed on MTFs (including SME Growth 
Markets)  currently  face  the  same  regulatory  environment  (apart  from  some  very  minor 
exceptions) in all Member States, the attractiveness of AIM is notably due to tax incentives 
(i.e.  AIM  shares  are  eligible  in  the  individual  saving  account  -ISA)  and  non-regulatory 
drivers. Being based in London, AIM enjoys a much more developed market ecosystem and 
benefits  from  wider  clustering  effects  which  attract  deeper  pockets  of  capital.  For  instance, 
AIM  issuers  attract  more  institutional  and  foreign  investors  than  any  other  SME-dedicated 
MTF in the EU (see Annex 7 on additional market background) and a significant number of 

57 

 
 
 
 
non-UK firms are listed on AIM194. In addition, the London Stock Exchange Group has set 
up  the  ELITE  Programme,  a  two-year  programme  which  prepares  promising  firms  for 
external  access  to  fund  raising  opportunities.  Since  its  launch  in  2012,  this  programme  has 
enrolled  more  than  700  countries  across  28  countries  (including  19  EU  Member  States195) 
that  are  connected  with  more  than  200  investors  (large  institutional  investors  and  family 
offices).  The  ELITE  Programme  is  presented  as  "capital  neutral"  as  regards  the  different 
sources  of  financing  it  promotes  (IPO,  private  equity,  venture  capital,  debt  products…). 
However,  this  programme  could  be  a  way  to  attract  more  IPOs  and  bond  offerings196 from 
EU  firms  in  their  expansion  phase  on  the  platforms  operated  by  LSEG 197 .  This  would 
potentially have a downward impact on EU SME markets and their local ecosystems. 

Eventually,  some  European  firms  in  their  expansion  phase  currently  benefit  from  a  healthy 
competition among trading venues (in terms of liquidity and cost of capital) that comply with 
the  same  European  rulebook.  After  its  withdrawal  from  the  EU,  the  UK  would  enjoy 
increased regulatory flexibility to deviate from the European single rulebook to make listings 
on  UK  platforms  more  enticing  in  relative  terms.  It  is  therefore  crucial  to  strengthen  the 
European  SME  Growth  Market  concept  in  order  to  facilitate  capital-raising  by  smaller 
businesses post-Brexit. 

7.5

EU and Member State budgets  

The  initiative  is  not  expected  to  have  any  noteworthy  impact  on  the  European  budget. 
National  competent  authorities  will  face  a  marginal  increase  in  costs,  mainly  due  to  the 
envisioned  changes  under  the  Prospectus  Regulation.  The  changes  will  require  them  to 
implement  new  procedures  thus  giving  rise  to  small  one-off  costs.  However,  as  the  new 
transfer prospectus will represent a simplified version of the full prospectus, on-going costs 
are expected to decrease. National competent authorities will also require additional time to 
vet notifications of delays for disclosing insider information and to decide whether to request 
a full justification. Again, there may be small one-off costs that arise from the initial change 
of procedure while on-going costs are reduced given a lower number of justifications overall.   

7.6

Social impacts  

The  initiative  is  not  expected  to  have  any  direct  social  impacts.  SMEs  however  form  the 
backbone of the EU economy and provide two-thirds of total private sector employment. The 
significance of SMEs in terms of employment has increased even further since the financial 
crisis,  with  SMEs  being  responsible  for  creating  around  85%  of  new  jobs  over  the  last  5 
years.  Provided  that  the  initiative  achieves  its  objectives  to  contribute  to  a  more  conducive 
environment for SME listing and improving the access to finance for SMEs, these companies 
will  be  able  to  grow  at  a  faster  pace,  with  positive  implications  for  employment.  The  few 
well-functioning  SME  markets  in  the  EU  already  make  a  huge  contribution  to  local  job 
markets.  For  instance,  in  2013,  the  UK  companies  listed  on  AIM  directly  supported  more 
than  430,000  jobs198.  Between  2006  and  2012,  companies  listed  on  First  North  Stockholm 
increased their workforce by 17% annually after the IPO, compared to an annual growth of 

194 Out of 1107 companies listed on AIM UK in 2012, 213 were not UK companies (19.1%) 
195 EU Member States: IT, UK, ES, RO, EL, FR, LU PL, NL, IE, SI, PT, HR, FI, SK, CZ, IE,     
196 28 ELITE companies issued bonds, raising a total of EUR 860 million. 
197 To date, 13 ELITE companies have raised capital through an IPO for EUR 240 million raised. 
198 Grant Thornton, The Economic Impact of AIM, 2015 

58 

 
 
 
 
                                                 
5%  for  all  private  companies  in  Sweden199.  By  strengthening  the  SME-dedicated  markets 
across the EU, the initiative could therefore enhance job growth. As such, it is expected that 
the measures, as part of a wider package to facilitate SME access to capital market finance, 
will positively impact the EU labour market and increase economic cohesion. 

7.7

Impact on third countries  

The initiative is not expected to have any significant direct impacts on third countries. If the 
initiative  (in  conjunction  with  other  CMU  measures)  is  successful  in  increasing  the  overall 
attractiveness of SME Growth Markets, it may lead to fewer companies opting for listings in 
other countries, in particular the US.   

7.8

Environmental impacts 

The initiative is not expected to have any direct environmental impacts. A significant number 
of  companies  listed  on  SME  Growth  Markets,  however,  engage  in  the  development  and 
innovation  process  of  new  environmental-friendly  technologies.  A  better  access  to  finance 
will  allow  these  companies  to  grow  at  a  more  rapid  pace  and  allocate  more  financial 
resources  to  respective  R&D  programmes.  The  initiative  will  notably  create  a  more 
conducive  environment  for  the  private  placement  of  bonds  with  institutional  investors, 
including  'green'  private  placements200.  As  such,  it  is  foreseeable  that  there  will  be  a  small 
positive indirect impact on the environment. There is, however, no reliable data available to 
quantify this impact with any reasonable accuracy.       

7.9

Impact on competitiveness 

Improved access to capital markets for SMEs will enable them to better balance their sources 
of finance. This will benefit these companies, especially in times of restricted access to bank 
loans. It may also have a small positive impact on their overall ability to raise capital. These 
factors  will  aid  SMEs  to  compete  both  amongst  themselves  as  well  as  with  larger 
competitors.  

7.10

  Coherence  

The preferred options are coherent with the existing legal framework. Recitals 6 and 55 of the 
Market  Abuse  Regulation  explicitly  call  for  administrative  costs  alleviations  for  SMEs  and 
financial  instruments  admitted  to  trading  on  SME  Growth  Markets.  It  is  furthermore  noted 
that any alleviations should however avoid potential detrimental impacts on market integrity. 
The technical adjustments envisaged meet both of these requests. Similarly, recital 132 of the 
Markets  in  Financial  Instruments  Directive  II  notes  that  administrative  burdens  on  SMEs 
should be reduced and that incentives should be provided for SMEs to access capital markets 
through  SME  Growth  markets.  The  recitals  of  MiFID  II  level  2  also  indicate  that  'SME 
growth  markets  should  not  have  rules  that  impose  greater  burdens  on  issuers  than  those 

199 NASDAQ, Capital Markets Union: The Road to sustainable growth in Europe, 2016   
200 Green PPs have been issued in the Euro-PP market. These issuances must adhere to sustainability standards that have to 
be certified by a third party. Moreover, the issuer needs to regularly demonstrate that the proceeds from the promissory note 
are  used  for  sustainable  projects.  Green  PPs  increase  access  to  private  placements  as  they  open  the  investor  base  to  ESG 
investors.  So  far,  all  green  issuances  have  experienced  strong  demand  and  exceeded  expectations.  It  is  important  to  add, 
however, that SSDs and Euro-PPs in general have experienced strong demand in the past and Green PPs tend to be perceived 
as  niche  products.  (BCG and Linklaters,  Study on  Identifying  the  market  and  regulatory  Obstacles  to  the  Development  of 
Private Placements of Debt instruments in the EU, 2017) 

59 

 
 
 
 
 
                                                 
applicable to regulated markets'201.The adjustments are also in line with the objectives of the 
Prospectus Regulation which aims to reduce the costs of listing for SMEs.    

7.11

  REFIT (simplification and improved efficiency) 

The initiative aims, in part, to reduce regulatory costs for issuers on SME Growth Markets. 
This is particularly the case for the amendments envisioned with regard to the Market Abuse 
Regulation.  The  below  table  summarises  the  regulatory  cost  reductions  of  the  preferred 
options and quantifies these reductions to the extent possible.  

Description 

Amount 

REFIT Cost Savings – Preferred Option(s) 
Comments 

Reduction  of 
number 
the 
insider 
of 
lists 
(permanent 
lists)  

Justification 
for  the  delay 
of 
insider 
information  

EUR  2.54  – 
4.99 million202 

(on 
average 
EUR  2,222  per 
issuer 
per 
year203)  

Lower bound:  

EUR  830,000  – 
2.49 million  

Upper bound:   

The cost reduction estimate is based on the fact that issuers on SME GMs 
will  only  need  to  compile  one  permanent  insider  list  per  annum.  The 
lower estimate represents a scenario whereby no new markets register as 
SME GMs. The upper estimate represents the case where all SME MTFs 
that have indicated an ambition to register as SME GMs actually do so.  

The  cost  reduction  arises  from  the  envisioned  approach  that  would 
require  issuers  to  only  justify  delayed  disclosures  on  the  request  of  the 
NCA.  Issuers  will  therefore  (usually)  only  need  to  notify  NCAs.  Full 
justifications are assumed to require 40 work hours on average205, while a 
mere notification would only take 1 hour (estimated).  

EUR  1.64  – 
4.92 million  

Lower  and  upper  bound  figures  represent  cases  of  an  average  of  0.25 
delays  per  issuer  per  year  and  0.75  delays  per  issuer  per  year 
respectively206. 

(EUR  731  – 
2,193  per  issuer 
per year204) 

EUR  1.8  –  2.7 
million  

An  explicit  exemption  will  remove  the  legal  uncertainty  regarding 
whether  the  market  sounding  regime  is  applicable  to  private placements 
of bonds. This will save issuers, investors and involved intermediaries the 
costs  of  applying  the  Market  Abuse  Regulation  market  sounding 
regime. 

The estimated cost figures represent estimates based on the overall costs 
arising from the application of the market sounding regime207.   

Explicit 
exemption 
from 
market 
soundings 
regime 
private 

the 

for 

201 Delegated Regulation 2017/65 
202 The  estimates  are  based  on  the  average  number  of  insider  lists  per  issuer  (available  for  AIM  IT  and  New  Connect), 
number of listings per venue (direct input from exchanges), the total amount of work-hours spent per list (based on figures in 
EMI, Effects of possible changes to the Market Abuse Directive, 2011) and assuming an average hourly rate of EUR 75.  
203 This  figure  represents  approximately  4.9  –  7.4%  of  the  overall  cost  impact  on  SME  GM  issuers  arising  from  MAR 
(estimated total costs lie in the range of EUR 30,000 – 45,000) 
204 This  figure  represents  approximately  4.8  –  7.3%  of  the  overall  cost  impact  on  SME  GM  issuers  arising  from  MAR 
(estimated total costs lie in the range of EUR 30,000 – 45,000)  
205 EMI, Effects of possible changes to the Market Abuse Directive, 2011 
206 Respective  estimates  on  occurrence  of  delays  based  on  (i)  EMI  -  'Effects  of  possible  changes  to  the  Market  Abuse 
Directive' (2011) and (ii) input from Polish FSA.     

60 

 
 
 
 
 
 
 
 
                                                 
placement  of 
bonds   

Transfer 
Prospectus  

EUR  4.8  –  7.2 
million  

The  application  of  an  alleviated  Prospectus  for  a  move  from  MTFs  to 
RMs would save issuers costs in the range of EUR 200,000 – 300,000208. 
The  figures  presented  reflect  a  scenario  of  24  transfers  from  MTFs  to 
RMs per year on average209   

8

  HOW WILL ACTUAL IMPACTS BE MONITORED AND EVALUATED? 

Providing  for  a  robust  monitoring  and  evaluation  mechanism  is  crucial  to  ensure  that  the 
regulatory  actions  undertaken  are  effective  in  achieving  their  respective  objectives  and  that 
market participants comply with them. The Commission should therefore establish a detailed 
programme for monitoring the outputs, results and impacts of this initiative. The monitoring 
programme  shall  set  out  the  means  by  which  and  the  intervals  at  which  the  data  and  other 
necessary  evidence  will  be  collected.  It  shall  also  specify  the  action  to  be  taken  by  the 
Commission, by the Member States and by the ESAs in collecting and analysing the data and 
other evidence. 

As part of a wider effort to monitor SME access to capital market financing, the Commission 
services  would  monitor  the  effects  of  the  preferred  policy  options  on  the  basis  of  the 
following non-exhaustive list of indicators: 

1.  Impacts on SME Growth Market issuers and market operators  

i.  Number of registered SME Growth Market  
ii.  Number of listings and market capitalisation across SME Growth Market  
iii.  Number and size of IPOs and IBOs on SME Growth Market  
iv.  Number and size of European SME IPOs and IBOs in third countries  
v.  Ratio of bank based vs. capital market based external financing of SMEs  
vi.  Number and volume of private placements of bonds  
vii.  Number of 'transfer prospectuses'  

2.  Impacts on liquidity on SME GMs  

i.  Number of liquidity contracts entered into by issuers  
ii.  Transaction volumes (calibrated against the number of listings per venue) 
iii.  Average free float   
iv.  Average bid-ask spreads of listings  
v.  Average liquidity at touch  
vi.  Average market book depth  
vii.  Average time to execution of orders  

207 Based  on  cost  calculation  in  Europe  Economics  "Data  Gathering  and  Cost  Analysis  on  Draft  Technical  Standards 
Relating  to  the  Market  Abuse  Regulation"  (2015)  –  The  estimates  provided  assume  that  70%  of  total  costs  set  out  in  the 
study relate to the private placement of debt (see "qualitative evidence.. suggests that much of the costs could accrue to the 
debt side")    
208 Estimate based on the Prospectus Regulation Impact Assessment and stakeholder input; Costs would reduce by around 25 
– 28.5% compared to the costs for a full Prospectus  
209 Figures based on statistics provided by MTF operators during the stakeholder consultation and direct data requests. The 
average provided reflects the years 2013-2017 (insufficient data for prior years).  

61 

 
 
 
 
 
 
                                                                                                                                                        
viii.  Average daily volatility  

The  regulatory  aspects  addressed  by  this  initiative  are  only  one  factor  that  will  affect  the 
above indicators. As explained in sections 2.2 and Annex 5, there are a range of out of scope 
drivers that are likely to have a greater impact on the listing behaviour and liquidity on SME 
Growth  Markets  than  the  envisaged  technical  amendments.  As  such,  it  does  not  appear 
appropriate to set out concrete objectives in quantitative terms. The success of the initiative 
should rather be gauged by the direction in which the respective indicators move. The initiate 
aims, for example, to increase indicators 1 (i), (ii), (iii), (vi) and (vii) while indicators 1 (iv) 
and  (v)  should  ideally  decrease.  The  same  logic  applies  to  indicators  in  section  2.  The 
initiative intends to enhance liquidity meaning that indicators 2(i), (ii), (iii), (v), (vi) should 
increase while (iv) and (vii) should decrease.   

Moreover, the above list of indicators is designed to not only monitor the specific impacts of 
the regulatory adjustments put forward in this initiative but also to observe the developments 
on  SME  Growth  Markets  more  widely.  This  will  help  to  also  evaluate  the  impact  of  the 
regulatory and non-regulatory measures that form the overall 'SME listing package'210.   

While  the  Commission  will  be  in  charge  of  monitoring  the  take  up  of  the  legislation 
according to EU law, many of the indicators set out would require the help of Member States, 
national  competent  authorities,  the  European  Securities  and  Markets  Authority  and  market 
operators. This is particularly the case for the indicators in point 2. The data requirements for 
these  indicators  can  only  be  fully  met  via  respective  input  from  national  competent 
authorities and market operators. While the Commission may be able to collect parts of the 
data via public sources and licenced databases, these are unlikely to satisfy the requirements 
and  will  not  provide  a  full  coverage  of  all  EU  SME  Growth  Markets.  In  addition,  the  data 
required  for  the  calculation  of  indicator  1(v)  will  be  partly  based  on  input  from  the  ECB 
which regularly assesses the access to finance of EU SMEs. 

210 Communication  from  the  Commission  on  the  mid-term  review  of  the  capital  markets  union  action  plan  ({SWD(2017) 
224 final} and {SWD(2017) 225 final} – 8 June 2017) 

62 

 
 
 
 
                                                 
ANNEX 1: PROCEDURAL INFORMATION 

1. Lead DG, Decide Planning/CWP references 

This  Impact  Assessment  was  prepared  by  Directorate  C  "Financial  markets"  of  the 
Directorate-General  for  Financial  Stability,  Financial  Services  and  Capital  Markets  Union" 
(DG FISMA). 

The  Decide  Planning  reference  of  the  file  entitled  "Building  a  proportionate  regulatory 
environment to support SME listing" is PLAN/2017/1686 

The  amendments  to  existing  legislation  supported  by  this  impact  assessment  have  been 
announced  in  the  Commission  Communication  on  the  Mid-Term  Review  of  the  Capital 
Markets Union Action Plan (08.06.2017).  

2. Organisation and timing 

Several services of the Commission with an interest in the assessment of this initiative have 
been associated in the development of this analysis.  

Four  Inter-Service  Steering  Group  (ISSG)  meetings,  consisting  of  representatives  from 
various Directorates-General of the Commission, were held in 2017 and 2018. 

The  first  meeting  took  place  on  9  November  2017  and  gathered  representatives  from  DG 
COMP, ECFIN, GROW, LS and the Secretariat General (SG). 

The second meeting was held on 8 December 2017, with representatives from DG COMP, LS 
and the Secretariat General (SG).  

The  third  meeting  was  held  on  2  March  2018.  Representatives  from  DG  COMP,  GROW, 
JUST, LS and the Secretariat General (SG) participated. 

The fourth meeting was held on 13 March 2018. Representatives from DG COMP, JUST, LS 
and the Secretariat General (SG) participated. This was the last meeting of the ISSG before 
the submission to the Regulatory Scrutiny Board on 16 March 2018. 

3. Consultation of the RSB 

A draft of the impact assessment was submitted to the Regulatory Scrutiny Board (RSB) on 
19 March 2018 and presented during a dedicated meeting on 20 April 2018. The Regulatory 
Scrutiny Board delivered a positive opinion with reservations on the draft on 22 April 2018. 
The comments formulated by the Board were addressed and integrated in the final version of 
the impact assessment.  

4. Evidence, sources and quality 

For  the  purpose  of  the  impact  assessment,  Commission  services  collected  a  significant 
amount of data directly from securities exchanges and National Competent Authorities. The 
data  collected  include  statistics  on  the  activity  and  characteristics  of  the  different  SME-
dedicated MTFs in the EU, and on the monitoring activity of national regulators on market 
abuse. Summaries of these data can be found in annex 11 and 13. 

63 

 
 
DG  FISMA  also  organised  two  series  of  technical  workshops  with  industry  stakeholders, 
specifically discussing barriers to listing for SMEs. These workshops were held on 7 October 
2016, 8 December 2016, 14 November 2017 and 28 November 2017.  

The  impact  assessment  was  conducted  based  on  extensive  qualitative  and  quantitative 
evidence from the following consultations: 

  Public consultation on Building a Capital Markets Union (18.02.2015-13.05.2015) 
  Public  consultation  on  the  Capital  Markets  Union  Mid-Term  Review  2017 

(20.01.2017-17.03.2017) 

  Call  for  Evidence:  EU  regulatory  framework  for  financial  services  (30.09.2015-

31.01.2016) 

  Public  consultation  on  Building  a  proportionate  regulatory  environment  to  support 

SME listing (18.12.2017-26.02.2018) 

Other  sources  used  included  extensive  academic  literature  and  research,  notably  from  the 
OECD, the World Bank, and various industry associations (AFME, FESE, World Federation 
of Exchanges…) 

64 

 
 
 
 
ANNEX 2: STAKEHOLDER CONSULTATION 

Over  the  Commission's  current  mandate,  SME  access  to  public  markets  has  been 
continuously monitored, being part of four public consultations. Issues related to regulatory 
burden  on  SMEs  when  accessing  public  markets  were  raised  in  the  context  of  the  Call  for 
Evidence, the CMU Action Plan and the CMU Mid-Term Review. In addition, a consultation 
solely  dedicated  to  building  a  proportionate  regulatory  environment  to  SME  listing  was 
launched at the end of 2017. As it built upon extensive consultation already conducted on the 
subject with stakeholders, this targeted consultation remained open for a period of 10 weeks 
only.  Commission  services  also  organised  two  series  of  technical  workshops  with  industry 
stakeholders in  2016 and 2017. Eventually, the initiative was discussed with  Member State 
representatives during a meeting of the Expert Group of the European Securities Committee 
(EGESC) in November 2017. 

1. 2017 public consultation on Building a proportionate regulatory environment to 
support SME listing 

On 18 December 2017, Commission services launched a public consultation on SME listing. 
It  focused  on  three  main  areas:  (1.)  how  to  complement  the  SME  Growth  Market  concept 
created by MiFID II; (2.) how to alleviate the burden on companies listed on SME Growth 
Markets;  and  (3.)  how  to  foster  the  ecosystems  surrounding  local  stock  exchanges,  in 
particular  with  a  view  to  improving  liquidity  of  shares  listed  on  those  trading  venues.  The 
Commission  received  71  responses,  sent  by  stakeholders  from  18  Member  States  and 
Norway211. 

Questions on challenges faced by public markets for SMEs 

When  describing  why  few  SMEs  seek  a  listing  on  EU  public  markets,  many  stakeholders 
mentioned  the  administrative  burden  placed  on  SMEs  by  market  abuse,  transparency  and 
disclosure  rules.  The  Market  Abuse  Regulation  was  described  as  difficult  to  interpret,  thus 
hindering  SMEs'  compliance  to  EU  legislation.  Costs  associated  with  becoming  and 
remaining  listed,  loss  of  privacy,  independence,  as  well  as  lack  of  general  SME  awareness 
and  education  were  also  highlighted.  Only  very  few  respondents  considered  that  no 
alleviation  to  the  current  regulatory  framework  on  SME  listing  should  be  granted.  It  was 
highlighted  that  medium  companies  tend  to  prefer  private  equity  investments,  strategic 
partnerships  and  M&A  while  small  firms  often  choose  business  angels  or  venture  capital, 
possibly also because of the low number of investment banks willing to support SMEs IPOs. 
Eventually,  the  Markets  in  Financial  Instruments  Directive  II  rules  on  research  unbundling 
were  mentioned  as  one  of  the  causes  for  the  low  number  of  SMEs  listing  across  European 
junior markets. 

Concerning  factors  inhibiting  institutional  and  retail  investment  in  SME  securities, 
respondents  highlighted  (i)  the  lack  of  reliable  periodical  financial  information  and 
independent  investment  research,  which  reduce  the  visibility  of  SMEs  towards  investors  as 
well  as  their  liquidity;  (ii)  the  low  market  capitalisation  on  SME  markets,  described  as 

211 6  public  authorities  (2  ministries  of  finance,  4  NCAs);  18  exchanges;  35  industry  associations  (6  for  brokers,  14  for 
investment  managers/investment  banks,  4  for  insurers,  3  for  accounting/audit,  2  for  CRAs,  4  for  issuers,  1  for  pension 
provision),  2  NGOs,  2  consultancy/law  firms,  2  promotional  banks,  1  academic  institution;  ESMA  Securities  Market 
Stakeholders Group and the Financial Services User Group. Those stakeholders come from 18 Member States: AT, BE, CZ, 
DE, DK, EE, EL, ES, FI, FR, HR, IE, IT, LV, NL, PL SE, UK.  

65 

 
 
 
 
 
 
                                                 
unattractive to investors; (iii) the absence of an equity culture in Europe; and (iv) the lack of 
appropriate tax incentive schemes. 

To explain the decline of ecosystems surrounding local exchanges, respondents emphasised  
the  small  market-size  for  SME  related  services,  the  lower  liquidity  of  smaller  companies 
coupled with regulatory changes (such as MiFID II), as well as the cost needed to train staff 
in order to meet regulatory requirements. 

Questions on specific regulatory barriers 

Overall, a majority of respondents were in favour of changing the criteria used to define an 
SME  Growth  Market,  be  it  for  equity  issuers  (through  the  market  cap  or  the  proportion  of 
SME  criterion)  or  for  debt-only  issuers.  Most  stakeholders  also  identified  the  managers' 
transactions regime as very burdensome and costly, arguing in favour of extending the delay 
to  notify  transactions,  increasing  the  threshold  after  which  transactions  need  to  be  notified, 
and  putting  the  responsibility  to  disclose  managers'  transactions  to  the  public  on  their 
National Competent Authority. On the approach towards insider lists, the vast majority of the 
respondents agreed that the requirement was onerous and burdensome – albeit necessary. On 
average,  they  were  in  favour  of  requiring  issuers  either  to  submit  insider  lists  only  upon 
request by the NCA, or to only maintain a list of 'permanent insiders'. Only a small minority 
argued in favour of fully exempting SME Growth Market issuers from keeping insider lists. 
Out  of  the  few  stakeholders  who  expressed  an  opinion  on  the  justification  of  the  delay  to 
communicate inside information, a majority were in favour of requiring issuers to submit the 
justification  only  upon  request  by  the  NCA,  and  to  exempt  them  from  the  obligation  of 
keeping  a  disclosure  record.  Again  only  considering  those  having  expressed  an  opinion,  a 
clear  majority  of  stakeholders  were  in  favour  of  exempting  private  placement  of  bonds  on 
SME  Growth  Markets  from  market  sounding  rules  when  investors  are  involved  in  the 
negotiations  of  the  issuance.  Eventually,  a  vast  majority  of  respondents  were  in  favour  of 
keeping  half-yearly  report  obligations  mandatory  for  SME  Growth  Market  equity  issuers. 
Concerning debt issuers, the views were more evenly split between stakeholders in favour of 
keeping  the  half-yearly  report  requirement  mandatory  and  those  in  favour  of  letting  the 
trading venues decide whether they wished to require such reports. Only a few stakeholders 
were in favour of removing the obligation altogether. 

On  the  other  hand,  stakeholders  were  split  with  regard  to  imposing  key  advisers  to  SME 
Growth  Market  issuers,  or  minimum  requirements  at  EU  level  for  the  delisting  from  SME 
Growth  Markets.  While  most  stakeholders  believed  that  SME  Growth  Market  issuers  only 
issuing  plain  vanilla  bonds  should  disclose  only  information  that  is  likely  to  impair  their 
ability to repay their debt, NCAs were essentially against the creation of a lighter disclosure 
regime for SME Growth Market issuers only issuer plain vanilla bonds.  

Among  those  who  expressed  an  opinion,  a  large  majority  of  respondents  believed  that 
alleviations should be granted to all companies listed on SME Growth Markets. It was argued 
that the “one market, one uniform set of rules” principle was necessary to ensure clarity and 
take-up for investors, issuers and financial intermediaries alike. Nevertheless, a few trading 
venues and issuer representatives argued that regulatory alleviations should be granted to all 
SMEs,  regardless  of  whether they  are  listed  on a  multilateral  trading  facility  or  a regulated 
market.  

66 

 
 
 
 
 
A majority of stakeholders were against setting rules on a mandatory transfer of issuers from 
an SME Growth Market to a regulated market, arguing instead that the transfer to a regulated 
market should always be left to the discretion of the issuer. Nevertheless, a few believed that 
transfers  of  listing  should  be  facilitated  through  appropriate  regulatory  incentives,  aimed  at 
reducing  the  administrative  burden  and  cost  of  listing  on  a  regulated  market.  Various 
stakeholders mentioned that such an incentive could take the form of a prospectus exemption 
or an alleviated prospectus when an issuer moves from an SME Growth Market to a regulated 
market. 

Questions on fostering the local ecosystem for SME Growth Markets and enhancing liquidity 

Market participants widely acknowledged  the benefits and usefulness of liquidity contracts. 
Among the stakeholders who expressed an opinion, a larger number agreed that there would 
be  merits  in  creating  an  EU  framework,  although  many  insisted  on  the  need  to  maintain 
flexibility  to  allow  such  contracts  to  be  tailored  to  local  conditions.  A  few  National 
Competent  Authorities  feared  that  such  practices  could  give  rise  to  manipulative  pricing 
behaviours.  Other  NCAs  however  saw  no  ground  for  concerns,  as  long  as  the  framework 
would be calibrated to prevent manipulative behaviours as under currently existing accepted 
market practices. A majority of respondents also hinted at prudential requirements hindering 
institutional investment into SME shares and bonds.  

Few  stakeholders  expressed  views  on  ways  to  facilitate  SME  bond  issuances,  and  proved 
rather  cautious  with  regard  to  unsolicited  credit  ratings.  On  setting  minimum  free  float 
requirements,  stakeholders  were  mostly  split  between  (i)  introducing  a  minimum  free  float 
requirement  at  EU  level  while  leaving  the  thresholds  to  the  discretion  of  market  operators, 
and (ii) not imposing any rule in the EU legislation. Only two respondents were in favour of 
setting a minimum free float and its threshold at EU level. 

Regarding the issue of low institutional investment in SMEs, several stakeholders referred to 
prudential  requirements  as  being  a  hindrance.  Others  stressed  that  national  regulations  can 
limit  institutional  investors’  ability  to  invest  in  companies  that  are  not  listed  on  regulated 
markets. Low levels of liquidity were also repeatedly mentioned.   

Few  stakeholders  expressed  interest  in  changing  the  tick  size  regime  applicable  to  SME 
Growth Markets. Many pointed out that it was too early to draw conclusions, considering the 
recent enforcement of the Markets in Financial Instruments Directive II and the short period 
of  application  of  the  new  regime.  Respondents,  mostly  those  representing  stock  exchanges, 
provided  preliminary  and  diverging  analyses  of  the  new  regime's  impact.  While  some 
contended that the impact would be neutral, others assessed that it could lead to a decrease in 
shares'  liquidity  and  spreads.  On  the  contrary,  a  third  category  argued  that  liquidity  and/or 
spreads could increase as a result of the new regime. 

Other barriers identified by stakeholders 

The consultation gave stakeholders the possibility to mention other areas of action that would 
not have already been covered by the current initiative.  

Many stakeholders conveyed the idea that the current initiative could be more ambitious in 
terms  of  scope.  This  could  be  achieved  by  changing  the  defining  criteria  of  SME  Growth 
Markets, or by considering also SMEs on regulated markets. 

67 

 
 
 
 
 
 
Among  the  most  cited  topics,  a  significant  number  of  respondents  stressed  their  serious 
concern  over  the  impact  of  the  Markets  in  Financial  Instruments  Directive  II  on  SME 
research  coverage.  Prospectus  was  also  repeatedly  mentioned  by  stakeholders,  questioning 
the  effects  of  the  new  regime  and  insisting  on  the  need  to  have  lighter  requirements  for 
SMEs.  As  regards  the  Market  Abuse  Regulation,  some  of  the  respondents  mentioned  that 
sanctions were not adjusted to the issuer size. Other stakeholders also mentioned that issuer 
that  the  notion  of  inside  information  creates  legal  uncertainty  and  that  small  issuers  were 
facing difficulty in identifying what actually constitutes a piece of inside information.  

Respondents also referred to a number of other legislations that would need consideration to 
further  alleviate  burden  on  SMEs.  A  couple  of  respondents  mentioned  the  application  of 
CSDR  as  potentially  problematic.  When  considering  more  specifically  SMEs  listed  on 
regulated markets, the shareholders rights’ directive, take-over bid directive and transparency 
directive  (notably  on  major  shareholding)  were  put  forward  as  good  candidates  to  ease 
burden  on  smaller  issuers.  Concerning  bond  issuances,  the  impact  of  PRIIPS  has  been 
considered as a potential show-stopper.  

The  issue  of  taxation  was  raised  by  several  stakeholders,  covering  various  topics  such  as 
Member  State  tax  incentives  and  state  aid,  tax  barriers  to  cross-border  investment,  barriers 
related to taxation of listed company versus non-listed enterprise, and the need to conduct an 
impact  assessment  on  the  cost  of  capital  arising  from  the  current  tax  bias  against  equity 
investments. 

2. Other public consultations 

2.1. Building a Capital Markets Union 

On 18 February 2015, Commission services launched a public consultation on the basis of the 
Green Paper "Building a Capital Markets Union"(CMU).  

When  discussing  measures  to  support  a  deeper  market  in  SME  and  start-up  finance,  and  a 
wider investor base, respondents underlined the importance of avoiding any disproportionate 
burden  and  cost  on  SMEs,  for  example  by  imposing  new  disclosure  requirements  and/or 
additional ad hoc financial standards to all SMEs. It was also deemed crucial to ensure that 
SMEs  are  not  overburdened  by  the  level  of  data  they  have  to  provide  and  to  limit  the 
disclosure  requirements  to  the  most  crucial  information  to  increase  their  possibilities  of 
getting  funding  on  European  capital  markets.  A  differentiated  approach  should  be  adopted 
based on the size of a company; disclosure requirements should be minimal in early stages. 

In addition, several respondents strongly encouraged the Commission to ensure that Level 2 
provisions of MiFID II would not negatively impact financial research coverage of SMEs. 

The  consultation  also  asked  a  question  on  the  need  to  develop  a  common  EU-level 
accounting  standard  for  small  and  medium-sized  companies  listed  on  MTF  or  SME 
Growth  Markets.  Some  respondents  considered  that  the  current  situation  is  appropriate  and 
should not be changed. Currently, SMEs listed on most MTFs prepare their financial reports 
according  to  national  accounting  standards,  although  there  are  already  MTFs  that  require 
SMEs  to  apply  the  International  Financial  Reporting  Standards  (IFRS).  Most  respondents 
considered, however, that some kind of initiative or incentive, legislative or other, is needed 
to render EU SMEs listed on MTFs more attractive to European and international investors 
through  enhanced  transparency  and  comparability  of  relevant  financial  information.  Rather 
than a full application of the IFRS or use of the IFRS for SMEs, many respondents suggested 
68 

 
 
 
that a pragmatic IFRS-based solution be found in order to deliver for SMEs listed on MTFs 
the  advantages  of  a  high-quality,  comparable,  international  set  of  accounting  rules,  whilst 
avoiding excessive administrative burden and costs, particularly in relation to disclosure. 

2.2. CMU Mid-term Review 

On  20  January  2017,  Commission  services  launched  a  public  consultation  on  the  Capital 
Markets Union Mid-term Review. 

The public consultation notably raised a question on potential new actions to make it easier 
for  companies  to  enter  and  raise  capital  on  public  markets.  Many  respondents  called  for  a 
proportionate  review  of  the  different  obligations  placed  on  non-financial  issuers, 
especially  SMEs.  Those  obligations  were  considered  potentially  too  burdensome  and  could 
deter these issuers from seeking a listing. One stakeholder also underlined that delisting from 
a  public  market  should  be  made  easier  in  order  to  avoid  dissuading  new  issuers  that  often 
consider public markets as a 'one-way-ticket'. 

As  regards  the  legal  framework  applying  to  quoted  companies,  respondents  criticised 
different  aspects  of  the  Market  Abuse  Regulation  (MAR).  For  instance,  rules  concerning 
managers'  transactions  as  well  as  insider  lists  were  criticised  for  being  too  burdensome  for 
companies listed on MTFs. The definition of inside information was considered too complex 
and would lead to the risk of an anticipated and premature disclosure of information by listed 
issuers.  One  respondent  indicated  that  with  respect  to  the  disclosure  of  price-sensitive 
information under the Market Abuse Regulation, equity markets should be distinguished from 
bond  markets:  in  equity  markets  prices  of  financial  instruments  are  more  exposed  to  the 
influence of company-specific information, while in bond markets prices are less subject to 
volatility and a function of the financial variables existing within the instruments themselves. 
Some  respondents  considered  that  the  scope  of  'market  soundings'  rules  under  the  Market 
Abuse Regulation was too wide and that many market participants would be reluctant to be 
tested  in  the  context  of  a  market  sounding  due  to  the  legal  risk  they  could  bear.  Other 
respondents  considered  that  the  extension  of  the  Market  Abuse  Regulation  to  companies 
listed  on  multilateral  trading  facilities  (MTFs)  made  access  to  public  markets  more 
expensive, because of the direct costs of monitoring and disseminating inside information. 

Taking  the  view  that  brokers  cannot  make  enough  money  to  maintain  equity  research 
coverage,  some  respondents  recommended  that  the  'after-market  incentives'  for  brokers  be 
improved, such as a pilot programme for tick sizes designed to take into account the needs of 
smaller companies. Some respondents therefore raised concerns about the impact of MiFID II 
level  2  rules  on  the  provision  of  SME  research,  as  they  would  make  it  very  difficult  to 
spread  the  cost  of  research  across  large  companies  and  mid-caps/small  companies.  Those 
respondents called for an assessment and a potential review of those rules. Other respondents 
considered  that  the  Commission  should  create  incentives  for  financial  analysts  to  cover 
smaller IPOs. Other respondents mentioned that including equity research within the scope of 
fiscal incentives applying to industrial research would encourage SME admission on public 
markets. Finally, some respondents considered that research on fixed-income products should 
not be in the scope of MiFID II.  

Several  stakeholders  recommended  the  introduction  of  a  "growth  company"  concept  that 
would  be  linked  both  to  the  size  and  period  of  listing.  Those  "growth  companies"  would 
benefit from a simplified and transitional regime applicable for a definite period of time.  

69 

 
 
 
 
Eventually, respondents emphasised  the importance of decreasing the regulatory  burden for 
local  investment  firms  offering  their  services  to  SMEs  (referring  to  MiFID  II,  the  Market 
Abuse  Regulation,  the  fourth  Anti-Money  Laundering  Directive,  the  Capital  Requirements 
Directive IV, etc.). 

2.3. Call for Evidence: EU regulatory framework for financial services 

On  30  September  2015,  Commission  services  launched  a  Call  for  Evidence  aimed  at 
improving  the  quality  of  the  current  regulatory  framework  in  financial  services,  including 
those  that  would  be  directly  impacted  by  CMU  actions.  It  was  thus  meant  to  verify  that 
financial reforms do not unduly burden access to finance and that they are consistent across 
financial sectors and coherent in a way that major regulatory gaps are addressed. To address 
barriers  to  finance  and  unintended  consequences,  the  call  for  evidence  supported  CMU 
actions with additional input to make appropriate adjustments to the regulatory framework. 

In  the  Call  for  Evidence,  respondents  broadly  supported  the  reforms  to  capital  market 
regulation.  They  however  expressed  concerns  about  how  the  market  abuse,  prospectus  and 
securities market legislation affects market financing of SMEs.  

Concerning  Market  abuse  regime  and  SME  Growth  Markets,  some  respondents  argued 
that the market abuse regime placed a high burden on issuers in SME growth markets, which 
might  ultimately  result  in  less  activity  and  thus  reduced  financing  for  SMEs.  Particular 
concerns related to the widening of scope of issuers' duties under the Market Abuse Directive 
and Market Abuse Regulation (MAD/R) regime to companies listed on Multilateral Trading 
Facilities (MTFs), such as providing insider lists and notifying managers' transactions. 

With regard to  Prospectus  Directive, stakeholders argued that the prospectus requirements 
for issuers were too burdensome and raised the cost of access to capital markets, in particular 
for smaller companies. 

Some respondents also argued that the new MiFID II  inducement  rules  would impede the 
provision  of  research,  especially  in  the  area  of  SMEs.  Furthermore,  it  was  claimed  that  the 
price of SME research would increase, as it would have to be budgeted independently. 

3. Technical workshops with stakeholders 

3.1. 2017 Technical workshops with securities exchanges on barriers to listing for SMEs  

On  14  November  2017,  Commission  services  organised  a  technical  workshop  with 
approximately  25  securities  exchange  representatives,  from  27  Member  States.  The  aim  of 
the workshop was to discuss technical provisions and potential alleviations to the regulatory 
framework on SME access to public markets, in preparation of the 2017 public consultation 
on "Building a proportionate regulatory environment to support SME listing".  

The first main topic of discussion concerned ways to make a success of the SME Growth 
Market  brand.  Many  stakeholders  implied  that the market  capitalisation was not  always  a 
good criterion to determine what an SME is, as it can vary a lot depending on the evolutions 
of  stock  markets.  Other  criteria  were  put  forward,  such  as  the  number  of  employees.  A 
quarter of the participants, considered the EUR 200 million market capitalisation threshold to 
proportionate, while a few argued that raising the threshold could be an option, as some EU 
regulations  (ELTIFs,  EU  Growth  Prospectus)  already  refer  to  companies  with  a  market 
capitalisation  higher  than  EUR  200  million.  Several  representatives  of  central  and  Eastern-

70 

 
 
 
 
 
European  exchanges  stated  that  the  market  capitalisation  threshold  was  already  high  with 
regard  to  both  their  companies  listed  on  regulated  market  and  on  their  MTFs.  On  the 
definition of non-equity issuers, many respondents agreed that the reference to the 2003 EU 
Recommendation was too narrow: the definition of SME bond issuers should rather take into 
account the size of the issuance (and not the size of the issuer). By these means, debt issuers 
would be allowed to get access to SME Growth Markets dedicated to bonds.  

Many  stakeholders  agreed  that  provisions  requiring  key  advisers  on  SME-dedicated  market 
should not be imposed, notably as it would imply an additional cost for SMEs. Nevertheless, 
some  respondents  did  recognize  that  such  key  advisors  could  also  add  value  to  listed 
companies. A majority of stakeholders also agreed that no mandatory rule should be set on 
the  transfer  of  listing  from  an  SME  Growth  Market  to  a  regulated  market,  while  some  of 
them further complained that more should be done to incentivise companies to graduate to the 
main market. Few participants stated that minimum rules on delistings should be added to the 
current legal framework to protect investors. Finally, certain stakeholders pointed out that the 
number of investors is decreasing and the ecosystems surrounding the exchange venues are as 
well declining. 

The second session discussed potential alleviations to the administrative burden on SME 
Growth Market issuers. A majority of participants contended that MAR had created costly 
obligations for SME issuers and imposed stringent requirements  - despite, as some of them 
mentioned,  the  important  role  it  plays  towards  investor  confidence.  Respondents  cited  the 
nature of inside information and the level of detail required to disclose such information as 
reasons to this burden. The difficulty to clearly identify what to consider inside information 
was  mentioned  as  problematic  by  some  participants.  Few  other  stakeholders  criticised  that 
sanctions  applicable  under  the  Market  Abuse  Regulation  were  not  proportionate  to  the 
companies  listed  on  MTFs,  which  often  have  a  market  capitalization  of  less  than  EUR  10 
million.  On  insider  lists,  a  couple  of  participants  highlighted  that  the  exemption  introduced 
for SME Growth Markets was not meaningful, as issuers would still be required to provide 
insider  lists  ex-posts  and  have  processes  in  place  to  do  so.  Many  stakeholders  complained 
about  the  strict  deadlines  given  to  managers  to  notify  their  transactions,  arguing  that  the 
three-day timeframe should be extended to five days or that two extra days should be granted 
to  the  issuers  to  disclose  such  information.  Some  of  them  also  explained  that  managers' 
transactions  should  only  be  notified  when  significant,  i.e.  with  a  value  higher  than  EUR 
50.000  or  100.000.  Three  trading  venues  also  agreed  that  MAR  rules  should  not  apply 
equally to equity issuers and to the ones issuing only debt instruments. Finally, a participant 
explained that, as most SME bonds are privately placed, the exemption from rules on market 
soundings for private placements would represent a real alleviation. 

The third and final topic of the workshop explored ways to foster the local ecosystems 
surrounding SME Growth Markets and enhance liquidity. It was mentioned that market 
participants  would  welcome  more  clarity  on  liquidity  provision  contracts,  considering  their 
importance  for  both  brokers  and  companies.  A  few  stakeholders  explained  that  Accepted 
Market Practices on liquidity provision should not be removed, advocating for legal certainty 
on the issue. Several exchanges also agreed that should be a minimum amount of free float, in 
the interest of investors. Free float should be defined, according to them, either in terms of 
percentage of the issuers’ market capitalisation or in terms of a fixed amount. However, they 
concluded that the free float requirement should be determined locally by the market itself. A 
stakeholder asked about the economic viability of unsolicited credit rating by market players 
different  from  CRAs.  In  response,  another  participant  explained  that  shadow  rating  were  a 
very useful practice in Nordic countries before the practice was banned by ESMA. Finally, a 

71 

 
 
participant  criticized  the  “one-size-fits-all”  requirements  prescribed  on  capital  requirements 
imposed  on  institutional  investors,  especially  with  regard  to  their  investments  policies  in 
SME, as well as the lack of tax incentives applicable to investments in small- and mid-caps. 

3.2. 2017 Technical workshops with other market participants on barriers to listing for SMEs 

On  28  November  2017,  Commission  services  organised  a  technical  workshop  gathering 
approximately  30  representatives  of  issuers,  investors,  brokers  and  other  financial 
intermediaries.  As  for  the  previous  workshop  with  exchanges,  the  aim  of  the  day  was  to 
discuss technical provisions and potential alleviations to the regulatory framework on SME 
access  to  public  markets,  in  preparation  of  the  2017  public  consultation  on  "Building  a 
proportionate regulatory environment to support SME listing". 

The  first  discussion  of  the  day  explored  ways  to  make  a  success  of  the  SME  Growth 
Market brand. On the definition of an SME, many participants agreed on the necessity to do 
away with the 2003 Recommendation definition. In particular, it was argued that the current 
threshold of EUR 200 million was too low and would need to be increased to least to EUR 
500  million.  On  the  definition  of  SME  bonds  issuers,  some  stakeholders  stressed  that  the 
rules  applying  to  corporate  bonds  cannot  be  the  same  as  the  ones  applying  to  equity 
instruments. Many participants also argued that the SME Growth Market status should also 
be  open  to  regulated  markets.  A  few  participants  also  expressed  concern  on  ESMA's 
regulation concerning SME Growth Markets and the admission document required to access 
them,  stressing  the  price  difference  in  drawing  up  a  full  prospectus  and  an  admission 
document. 

The second session discussed potential alleviations to the administrative burden on SME 
Growth Market issuers. The great majority of stakeholders agreed that the expenses derived 
from the application of MAR are remarkable for SMEs. Some of them suggested that MAR 
should  be  abandoned  altogether  on  SME-dedicated  markets,  or  that  legislation  should  go 
back  to  the  previous  MAR  regime,  as  the  new  regime  often  leads  to  companies  trying  to 
delist  their  shares  from  the  market.  Stakeholders  remarked  that  the  exemption  provided  by 
MAR from keeping and updating an insider list was not compelling, as a company could be 
still  asked  by  the  NCA  to  provide  an  overwhelming  quantity  of  information  hardly 
manageable  for  smaller  issuers.  Some  participants  did  point  out  that  insider  trading  was  a 
great  risk  potentially  detrimental  to  investor  confidence.  Therefore  maintaining  at  least  the 
permanent  section  of  the  insider  list  could  appear  as  a  balanced  approach.  With  regard  to 
managers' transactions, it was stated by many that extending the three day timeframe to notify 
the market would not endanger investor protection. Few stakeholders stated that EUR 20.000 
would represent a more proportionate threshold for the disclosure of managers' transactions, 
although  it  could  be  increased  even  further  without  compromising  market  integrity.  Others 
argued that requiring the NCA to make managers' transaction public would reduce the burden 
placed on issuers. Few stakeholders expressed concerns with regard to the level of sanctions, 
which  in  some  countries  are  particularly  disproportionate  compared  to  the  market 
capitalization of the issuers. Some participants argued that transfers of listing from an SME 
Growth  Market  to  a  regulated  market  should  be  incentivised  through  a  less  burdensome 
prospectus.  Eventually,  while  many  stakeholders  highlighted  the  important  role  played 
authorised  advisers,  a  significant  number  of  participants  also  underlined  that  a  statutory 
requirement on such advisers should be left to the discretion of the exchanges themselves. 

The third and final topic of the workshop explored ways to foster the local ecosystems 
surrounding  SME  Growth  Markets  and  enhance  liquidity.  Many participants expressed 

72 

 
 
concerns about the impact of MIFID II rules on research (especially for the coverage of small 
and midcaps). Another problem arises from Solvency II, which restricts insurance companies' 
investment in equity, especially for shares listed on an MTF. Other issues raised included the 
scarcity of tax incentives and the illiquidity of SME-dedicated MTFs. 

3.3. 2016 Commission workshops on barriers to listing for SMEs 

The 2016 Commission workshops on "barriers to listing for SMEs" were held on 7/10/2016 
and  08/12/2016.  They  brought  together  around  80  securities  exchanges,  issuers,  investors, 
brokers, accounting firms, credit rating agencies, authorised advisers, associations and public 
institutions  to  assess  the  functioning  of  public  markets  for  SMEs.  The  aim  was  to  have  a 
constructive  forward-looking  discussion  and  to  generate  practical  insights  on  how  the 
situation  of  EU  SME-dedicated  markets  can  be  improved.  Discussion  was  held  under 
Chatham House rules. 

Some  workshop  participants  reckoned  that  the  "SME  Growth  Market"  brand  –  created  by 
MiFID II - was an opportunity to raise awareness on the value of long-term equity capital in 
Europe. SME markets are a crucial point of the financial ladder for SMEs. However, to make 
the  "SME  Growth  Market"  concept  successful,  the  discussions  showed  that  three  main 
challenges needed to be overcome: 

The  first  identified  challenge  was  the  lack  of  well-prepared  companies  for  IPOs.  This 
situation  stems  from  various  factors.  SMEs often exhibit  a low interest in equity capital. 
Furthermore,  as  stock  exchanges  do  not  work  in  isolation,  alternative  sources  of  funding 
(such as venture capital and private equity markets) are needed to finance small companies 
prior  to  the  IPO  stage.  To  tackle  this  resistance  to  equity  capital  as  well  as  the  shortage  of 
financing  at  the  pre-IPO  stage,  several  European  stock  exchanges  have  created  incubators 
that  bring  together  innovative  companies,  providers  of  alternative  sources  of  financing  and 
market professionals specialised in SMEs.  

Workshop participants considered that it was important to limit the costs and administrative 
burden  borne  by  SMEs  to  avoid  deterring  them  from  joining  public  markets.  Several 
workshop participants suggested that public schemes should help to reduce the costs incurred 
by SMEs when preparing for IPOs. The lighter "EU Growth Prospectus" (as envisaged by the 
prospectus  regulation)  was  also  described  by  some  workshop  participants  as  a  tool  to 
encourage  market  financing.  To  limit  costs,  different  workshop  participants  also  indicated 
that SME issuers should always have the choice to use either IFRS or national GAAPs in the 
preparation  of  financial  statements.  When  companies  wish  to  attract  a  pool  of  foreign 
investors  and  opt  for  the  use  of  IFRS,  some  workshop  participants  indicated  that  a  users' 
guide or a toolbox on IFRS (that could be developed by the Commission in close cooperation 
with IASB) would facilitate the shift to IFRS.  

In  addition,  it  was  underlined  that  investors  need  to  have  confidence  in  the  corporate 
governance of the SMEs that join the market. One usual measure to mitigate the risk of low 
corporate governance is the requirement for companies to appoint an authorised advisor that 
help companies to comply with their obligations before the IPO and after the listing of shares. 
Other  exchanges  are  also  taking  additional  measures  such  as  the  publication  of  a  corporate 
governance code.   

The  second  challenge  to  be  identified  was  the  disappearance  of  the  ecosystem 
surrounding  local  stock  exchanges  (i.e.  a  network  of  brokers,  equity  analysts,  credit 
rating  agencies,  lawyers,  accountants  focusing  on  local  SMEs)  able  to  support 

73 

 
 
companies at the IPO stage. One consequence of this decline in local ecosystems is the rise 
in the costs of SME IPOs. Costs are amplified as SMEs are compelled to rely on large banks' 
services when going public. The decline of ecosystems is particularly acute for equity brokers 
specialising in SMEs. Due to regulatory and technological changes, equity trading is focusing 
on large caps, thus leading to a decline in the liquidity of SME shares. This low liquidity can 
deter  institutional  investors  from  investing  in  SME  shares.  As  liquidity  is  weak,  brokers 
specialised  in  SMEs  also  experience  a  decline  in  their  brokerage  fees.  As  a  consequence, 
those  brokers  are  not  incentivised  anymore  to  provide  equity  research  on  SMEs,  which  in 
turn has a downward impact on liquidity. Despite the different initiatives taken by some stock 
exchanges to improve liquidity or to ensure a minimum research coverage on the SME shares 
listed  on  their  trading  venues,  some  workshop  participants  considered  that  some  regulatory 
changes were necessary (such as the modifications of the MiFID II rules on the unbundling of 
research  and  trading  fees;  the  "tick  size"  regime  under  MiFID  II).  Several  workshop 
participants  indicated  that,  more  generally,  there  was  a  need  for  a  proportionate  regime  for 
issuers  (notably  under  the  Market  Abuse  Regulation),  investors  and  investment  service 
providers on the SME dedicated markets. 

The third identified challenge was the low investment flows into SME shares, as there is 
currently a mismatch between capital demand and capital supply for listed SMEs. Many 
workshop participants notably recognised the need for more institutional investors investing 
in SME shares and underlined that pension funds could be natural investors in SME stocks. 
Some  workshop  participants  reckoned  that  there  was  a  need  for  anchor  (public)  investors, 
who could attract other institutional investors, and suggested the creation of a public fund that 
could invest in SME shares. Other workshop participants also expressed the view that state 
aids  as  well  as  promotional  banks  could  also  play  a  greater  role  to  support  investments  in 
listed SMEs. 

Some  workshop  participants  also  underscored  the  fact  that  investment  in  SME  shares  by 
insurance companies was currently impeded by the capital charges under Solvency II. They 
also indicated that the success of European Long-Term Investment Funds (ELTIFs) would be 
limited  if  ELTIFs  do  not  receive  a  more  favourable  tax  treatment  available  to  other  funds. 
Other workshop participants also mentioned that they were working  on the development of 
listed funds that would invest both in quoted and unquoted SMEs. Those listed funds could 
be used as a bridge between quoted SMEs and retail investors.  

Some  workshop  participants  also  stressed  the  need  for  retail  investors.  They  notably 
considered that retail investors could be important to create liquidity on SME markets (while 
institutional  investors'  investments  are  usually  illiquid).  Some  workshop  participants 
considered  that  retail  participation  could  be  incentivised  notably  through  tax  incentives. 
Nevertheless,  many  workshop  participants  considered  that  retail  investors  suffered  from  a 
low  level  of  financial  literacy.  Another  workshop  participant  stressed  that  SME  stocks 
remained a high risk asset class not always suitable for retail investors. 

4. Minutes of the EGESC meeting of 10 November 2017 on Regulatory barriers 
to SME listing  

The Expert Group of the European Securities Committee is a consultative entity set up by the 
Commission Services  in order to provide advice and expertise, in the area  of the securities 
law,  to  the  Commission  and  its  services.  Member  States  were  provided  with  a  document 
summarising  the  main  elements  of  the  open  public  consultation  on  SME  listing  that  was 
launched in December 2017.  

74 

 
 
FR:  FR is very supportive of the initiative. Europe has a weak IPO landscape.  FR agrees 
with the scope, i.e. SME Growth Markets. FR is in favour of raising the threshold defining an 
SME under MIFID II (i.e. Market cap under EUR 200 million). FR is also in favour of: (i) 
excluding private placement of debt instruments from the market sounding rules under MAR; 
(ii)  key  advisor  requirement  on  SME  GM  and  (iii)  creating  a  EU  framework  for  liquidity 
contract and (iv) transfer of listing from regulated markets (RM) to SME GM. FR has already 
put in place a framework for such transfer from RM to MTF since 2009. For the ecosystems, 
MiFID II research payment provisions are an issue for research on SMEs.  

IT: IT appreciates very much this initiative. As regards the scope of this exercise, IT would 
be very open and would also include SMEs listed on RM. IT already tries to accommodate 
the  situation  of  SMEs  on  RM,  by  using  different  thresholds  under  different  texts 
(shareholdings notifications, public offers, related-party transactions…). The lack of liquidity 
and  the  limited  information  on  SMEs  are  the  main  concerns.  IT  is  sceptical  whether 
unsolicited  ratings  are  sufficient  to  compensate  this  lack  of  available  information.  IT 
concludes that tax incentives also matters.  

DE:  DE  welcomes  this  initiative.  It's  a  valuable  approach,  i.e.  striking  the  right  balance 
between  alleviating  the  administrative  burden  while  maintaining  investor  protection.  DE 
agrees with the scope (i.e. SME GM) strongly supports the view that requirements for SMEs 
on RM should apply in the same way. As regards the voluntary transfer of listings from RM 
to SME GM, DE underlines that this question does not involve only the SME issuers but also 
other  market  participants,  such  as  investors.  In  term  of  alleviations  under  MAR,  a  cautious 
approach is needed. DE appreciates that the extension of MAR to MTFs will not be modified. 
As  regards  the  alleviations  proposed,  a  cautious  'cost-benefits  approach'  should  be  carried 
out. DE underlined that Deutsche Börse has set up a new segment for SMEs (Scale). SMEs 
on Scale shall have a Capital Market Partner. The exchange also finances research on issuers.  

LV: The IPO pipeline is broken in LV, while the bond market is developing. LV has started 
some  work  with  the  Commission's  Structural  Reform  Support  Service.  As  regards  the 
threshold defining an SME (EUR 200 million), this is already very high for LV market. This 
point was already raised by several other Member States in the past.  

CZ: CZ considered this workstream as very important for us. On our RM, a lot of companies 
could be considered as  SMEs under MiFID II and our  RM could even be considered as  an 
SME GM. Some of the measures proposed in the discussion paper presented by COM are too 
intrusive  (such  as  the  transfer  from  RM  to  SME  GM).  SMEs  are  small  and  the  liquidity  is 
low. Costs of SME IPOs or bond issuances are high (e.g. ratings for bonds are not required 
but expected by investors). CZ is looking at how to use structural funds in order to finance 
IPO costs (several MS – such as PL – are following this path). The Prague Stock Exchange 
has created a SME-dedicated MTF, START. One important feature is that companies on this 
trading venue do not need to use IFRS. As regards alleviations under MAR, the concept of 
SME  GM  was  already  known  when  the  proposal  was  discussed.  There  are  already  some 
exemptions for SME GM issuers under MAR. CZ is sceptical about how further exemptions 
could  be  granted  for  those  issuers.  Investors  have  some  expectations  in  terms  of  market 
integrity. Investor confidence should not be undermined. For the liquidity provision contract, 
it's an accepted market practice in five MS. It could be recognised as an AMP at EU level.  

ES:  ES strongly support this initiative. SMEs play a central role in ES economy. ES agrees 
with the scope of this initiative (SME GM vs. RM). The mandatory transfer from SME GM 

75 

 
 
to RM is a requirement that is too stringent. As regards the costs, ES recalled that the biggest 
cost stems from the preparation of the admission document.  

NL:  NL  supports  this  exercise.  NL  understands  the  focus  on  SME  GM  but  underlines  that 
many SMEs are listed on RM. The proposal envisages modifying some points of MIFID II – 
this  is  a  little  bit  too  premature,  as  MiFID  II  enters  into  application  in  January  2018.  NL 
underscores that the prudential requirements of MTFs are a big issue and COM should also 
look at this problem.  

PT: PT agrees with the scope and considers that issuers on RM should not be covered. COM 
should  be  cautious  and  should  not  undermine  investor  protection  and  market  stability.  The 
flow of information towards supervisors should not be impaired by the proposal. The current 
definition  of  SMEs  under  MiFID  II  (market  cap.  under  EUR  200  million)  is  quite  high. 
However,  a  new  threshold  could  be  the  one  used  in  the  Prospectus  Regulation  (EUR  500 
million).  As  managers'  transactions  and  insider  lists,  the  obligations  placed  on  SME  GM 
issuers should  not be reduced.  For bond issuers, all inside information should be disclosed. 
PT welcomes some proposals: the definition of a liquidity provision contract at the EU level 
would be useful. The harmonisation of delisting regime is also an interesting point.  

LU:  LU  welcomes  this  initiative.  The  transfer  from  a  SME  GM  to  a  RM  can  raise  some 
issues. LU underlines that this proposal should not undermine investor protection.  

DK: DK is very supportive of this initiative. The scope is right: this work should be limited 
to  SME  GM.  DK  is  more  cautious  on  the  alleviations.  Investor  protection  and  trust  of 
investors in those SME GMs should be preserved. The changes to the EU rulebook should be 
carefully done.   

BG:  BG  is  very  supportive  of  this  initiative.  In  BU,  the  market  capitalisation  and 
turnover/liquidity  on  shares  are  very  low.  On  the  BU  RM,  there  are  only  4  big  companies. 
Pension funds' investment is inexistent. COM should be more ambitious and includes SMEs 
listed on RM in its initiative. BG supports several potential proposals such as the alleviations 
for SME GM as regards insider lists and management' transactions and the transfer from RM 
to SME GM. As regards SME bond information, BG disagrees with a potential proposal that 
would allow ratings provided by entities not registered as CRA.  

CY: The current trend is not to be traded on SME GM but on RM. Another trend is the initial 
coins  offering  (ICOs).  As  regards  alleviations  under  MAR,  CY  is  very  cautious.  Market 
abuses are committed even by SMEs.  

UK:    UK  supports  this  initiative  very  strongly.  UK  underlines  that  there  is  a  lack  of 
knowledge  about  the  different  sources  of  financing  for  SMEs.  UK  recommends  a  cautious 
approach on the use of structural funds to finance the IPO costs. The approach of the COM 
on this file is sensible. 

76 

 
 
 
ANNEX 3: WHO IS AFFECTED AND HOW? 

1. Practical implications of the initiative 

The envisioned regulatory adjustments will benefit existing SME Growth Market issuers by 
applying  a  more  proportionate  approach  as  regards  their  obligations  under  MAR  and  the 
Prospectus Regulation. This will reduce their on-going administrative costs. Issuer will also 
profit from the ability to enter into liquidity contracts in order to ensure a minimum level of 
liquidity in the trading of their shares. This will make respective investments more attractive 
thus enhancing the companies’ ability to raise equity capital in secondary offerings.  

SME debt issuers will furthermore benefit from the re-calibration of corresponding definition 
as  well  as  the  disapplication  of  mandatory  half-yearly  reports  under  MiFID  II.  These 
amendments will facilitate MTFs specialising in bonds or in bonds and shares to register as 
SME Growth Markets. SME debt issuer will thereby benefit from the regulatory alleviations 
for this market category envisioned by this initiative as well as those already implemented. In 
addition, the legal clarification concerning the non-application of the market sounding regime 
to the private placement of bonds will lower the administrative and legal costs of these debt 
issuances. 

Investors  will  also  benefit  from  the  mechanisms  envisaged  by  this  initiative  and  aimed  at 
enhancing liquidity, such as the free float requirement (when a company is seeking a listing), 
as  well  as  the  European  regime  of  liquidity  provision  contract.  Both  modifications  should 
contribute to ensuring a minimum level of liquidity on SME shares.   

Both  sets  of  regulatory  adjustments  will  enhance  the  relative  attractiveness  of  listings  on 
public capital markets and public debt issuances in comparison to bank based funding sources 
respectively. This will facilitate SMEs to diversify their sources of funding and thereby make 
them more resilient to economic shocks. This effect will be further enhanced by the already 
implemented amendments as regards SME Growth Markets under the Prospectus Regulation 
and CSDR.  

In  addition,  market  operators  will  benefit  in  the  long  run  by  increased  levels  of  public 
issuances of equity and debt compared to the baseline scenario. The envisioned adjustments 
may also improve the profitability of liquidity providers in SME shares.  

On the cost side, the initiative implies only a marginal burden on NCA budgets. Supervisors 
will need to stem minor one-off costs in order to adjust to the new regulatory framework. On-
going  costs  should  not  increase  given  an  approximate  balance  between  additions  and 
reductions  of  costs.  Market  operators  could  also  face  minimal  costs  in  order  to  adapt  their 
exchange rules.      

2. Summary of costs and benefits 

The  below  table  provides  a  summary  of  the  expected  benefits  arising  from  the  preferred 
option. It should be noted that the quantification of benefits is based on annual costs savings 
and  takes  in  account  only  the  current  number  of  issuers  on  SME  GMs  (or  SME  focused 
MTFs; see comments). Future costs savings are expected to be higher given the assumption 
that the number of listings and bond issuances on SME GMs will increase.    

77 

 
 
 
Description 

Amount 

Comments 

I. Overview of Benefits – Preferred Option 

Direct benefits 

N/A 

Extended    deadline  for 
publicly 
to 
issuers 
transactions 
disclose 
relative 
the 
to 
notification  by  PDMRs 
and PCAs 

Permanent 
insiders 

List 

of 

EUR 2.54 – 4.99 million212 

Justification  of  delayed 
insider 
disclosure  of 
information  only  on 
request of NCA 

Lower bound: 

EUR 830,000 – 2.49 million 

Upper bound: 

EUR 1.64 – 4.92 million 

EUR 1.8 – 2.7 million  

Explicit 
exemption 
market 
the 
from 
soundings  regime  for 
private  placement  of 
bonds   

There  is  insufficient  data  to  estimate  the 
benefit  of  the  technical  adjustment  with 
reasonable  accuracy.  The  overall  costs  of 
disclosure will ultimately remain the same, 
are 
although 
temporal 
foreseeable  given 
flexibility. Benefits arise mainly due to the 
avoidance  of  legal  liability  in  the  case  of 
late disclosure from PDMRs.  

increased 

savings 

small 

costs 

The costs reduction is based on the fact that 
issuers  on  SME  GMs  will  only  need  to 
compile  one  permanent  insider  list  per 
annum.  The  lower  estimate  represents  a 
scenario  whereby  no  new  markets  register 
as  SME  GMs.  The  upper  estimate 
represents the case wherein all SME MTFs 
that  have  indicated  an  ambition  to  register 
as SME GMs actually do so.  

from 

The  cost 
the 
reduction  arises 
envisioned  approach  that  would  require 
issuers  to  only  justify  delayed  disclosures 
on  the  request  of  the  NCA.  Issuers  will 
therefore  (usually)  only  need  to  notify 
NCAs.  Full  justifications  are  assumed  to 
require  40  workhours  on  average213,  while 
a mere notification would only take 1 hour 
(estimated).  

Lower  and  upper  bound  figures  represent 
cases  of  an  average  of  0.25  delays  per 
issuer  per  year  and  0.75  delays  per  issuer 
per year respectively214. 

An  explicit  exemption  will  remove  the 
legal  uncertainty  regarding  whether  the 
market  sounding  regime  is  applicable  to 
private placements of bonds. This will save 
involved 
issuers, 

investors 

and 

212 The  estimates  are  based  on  the  average  number  of  insider  lists  per  issuer  (available  for  AIM  IT  and  New  Connect), 
number of listings per venue (direct input from exchanges), the total amount of work-hours spent per list (based on figures in 
EMI, Effects of possible changes to the Market Abuse Directive, 2011) and assuming an average hourly rate of EUR 75.  
213 EMI, Effects of possible changes to the Market Abuse Directive, 2011  
214 Estimate based on EMI, Effects of possible changes to the Market Abuse Directive (2011) and input from Polish FSA.     

78 

 
 
 
 
 
 
 
                                                 
intermediaries  the  costs  of  applying  the 
Market Abuse Regulation market sounding 
regime. 

figures 

represent 
The  estimated  cost 
estimates based on the overall costs arising 
from 
the  market 
sounding regime215.   

the  application  of 

Lighter 
"transfer 
prospectus"  for  issuers 
from  SME 
moving 
GMs to RMs  

EUR 4.8 – 7.2 million  

Define  an  SME  debt 
the 
issuer  based  on 
value of the issuance 

Indirect benefits 

N/A 

No  mandatory  half-
yearly  reports  for  non-
equity issuers 

N/A 

The application of an alleviated Prospectus 
for a move from MTFs to RMs would save 
issuers  costs  in  the  range  of  EUR  200,000 
–  300,000216.  The  figures  presented  reflect 
a  scenario  of  24  transfers  from  MTFs  to 
RMs per year on average217  

It  is  also  expected  that  NCAs  will  face 
lower  costs  as  the  transfer  prospectus  will 
require  less  workhours  to  validate  (cost 
saving not quantified given lack of data).  

Re-calibrating  the  definition  of  SME  debt 
issuer  will  increase  the  number  of  MTFs 
that can apply for the SME GM status. This 
will  benefit  the  issuers  on  these  markets 
given  the  existing  alleviations  as  well  as 
those envisaged by this initiative   

There  are  currently  no  bond  MTFs  that 
have  registered  as  an  SME  GM.  This  is 
partially  due  to  the  current  obligation  for 
issuers  to  publish  half-yearly  report.  As 
such,  there  are  no  direct  benefits.  The 
envisaged amendment should be viewed in 
conjunction  with  the  re-calibration  of  the 
definition of SME debt issuer (see above). 
Once  bond  MTFs  register  as  SME  GMS, 
issuers  will  save  the  costs  of  publishing 
half-yearly reports.      

European 
regime 
liquidity contracts 

for 

The  European  regime  for  liquidity 
contracts will enable all issuers on 
SME  GMs  to  engage  in  such 

The  effect  on  primary  offerings  is  more 
limited  as  liquidity  risks  can  only  be 
gauged  once  respective  shares  are actually 

215 Based  on  cost  calculation  in  Europe  Economics  "Data  Gathering  and  Cost  Analysis  on  Draft  Technical  Standards 
Relating  to  the  Market  Abuse  Regulation"  (2015)  –  The  estimates  provided  assume  that  70%  of  total  costs  set  out  in  the 
study relate to the private placement of debt (see "qualitative evidence.. suggests that much of the costs could accrue to the 
debt side")    
216 Estimate based on the Prospectus Regulation Impact Assessment and stakeholder input.  
217 Figures based on statistics provided by MTF operators during the stakeholder consultation and direct data requests. The 
average provided reflects the years 2013-2017 (insufficient data for prior years)  

79 

 
 
 
                                                 
contracts.  It  is  unclear,  however, 
how many issuers will take up this 
possibility.  More  so,  there  are  no 
direct  benefits  of  such  contracts. 
However,  the  increased  liquidity 
resulting  from  such  contract  will 
reduce liquidity and volatility risks 
for investors. In turn, valuations of 
issuers  will  increase.  This  will 
increase the capital that businesses 
can 
raise  both  via  secondary 
offerings  (and  to  a  more  limited 
extend primary offerings).  

N/A 

trading.  Nevertheless,  primary  offerings 
will benefit from the investors' expectation 
of higher liquidity if the issuer enters into a 
liquidity contract.  

Minimum  free  float  requirements  aim  at 
increasing  liquidity,  especially in  the early 
stages  following  primary  offerings.  The 
same  reasoning  applies  as  for  liquidity 
contract  in  that  it  will  lower  risks  to 
investors  and 
thus  ultimately  enable 
companies to raise more capital.    

II. Overview of costs – Preferred option 

Citizens/Consumers  

Businesses 

Administrations 

One-off 

Recurrent 

One-off 

Recurrent 

One-off  Recurrent 

None  

None 

None 

None 

None  

(recurrent 
costs  will 
be 
lower 
than  status 
quo 
as 
NCAs  will 
need  to  vet 
fewer 
justification
s)  

to 

be 

NCAs 
will 
required 
to  change 
internal 
procedure
s 
and 
establish a 
mechanis
m 
decide 
when 
request 
full 
justificati
ons.  This 
will  give 
rise 
to 
marginal 
one-off 
costs 

to 

Requirement  for  SME 
GMs  to  impose  a  free 
float requirement 

Direct costs 

Justificat
ion 
of 
delayed 
disclosur
e 
of 
insider 
informat
ion  only 
on 
request 
of NCA  

Indirect costs  None 

None 

None 

None 

None  

None 

80 

 
 
 
 
  
 
 
 
for 

Lighter 
"transfer 
prospect
us" 
issuers 
moving 
from 
SME 
GMs 
RMs  

to 

will 

The 
establish
ment  of  a 
transfer 
prospectu
s 
impose 
minor 
one-off 
costs 
NCAs 
given 
required 
changes to 
internal 
procedure
s.  

on 

None 

None 

None 

None 

(lower  costs 
status 
than 
quo 
of 
issuing  a  full 
prospectus) 

Direct costs 

Indirect costs  None 

None 

None 

None 

81 

 
 
 
 
 
 
 
 
 
 
ANNEX 4: DEFINITIONS 

Accepted  Market 
Practice 

Blue-chip 
company 
Commission 
Expert  Group  on 
Corporate Bonds 
ELTIFs 
Regulation 

EU Growth 
Prospectus 

Fintech 

Free float 
High-Frequency 
Trading 

Insider dealing 

Inside 
information 

Insider list 

Key adviser 

Liquidity 
contract 

Market  Abuse 
Regulation 

Market sounding 

MiFID II 

MTF 

Person  Closely 
Associated 
(PCA) 

For the purposes of the market abuse regime, a practice that is reasonably expected in one or 
financial markets and is accepted by the relevant national competent authority of a member 
state. Such practices provide a defence against the market abuse behaviour of manipulating 
transactions where there is also a legitimate reason for the trading. 

A large and highly liquid company listed on a regulated market  

The  Expert  Group  on  European  Corporate  Bond  Markets,  which  was  established  by  the 
European  Commission  to  provide  a  cross-market  analysis  of  corporate  bond  markets  and 
recommendations on how to improve their functioning. 
Regulation (EU) No 2015/760 of the European Parliament and of the Council on European 
long-term investment funds European long-term investment funds 
A proportionate prospectus regime for SMEs required by Regulation no. (EU) 2017/1129 in 
case of an offer of securities to the public provided that they have no securities admitted to 
trading on a regulated market of (i) an SME as defined in the Prospectus Regulation; (ii) a 
non-SME with an average market capitalization of less than EUR 500 million based on the 3 
previous calendar years and whose securities are to be traded on an SME growth market; and 
(iii)  any  issuer  not  listed  on  an  MTF,  having  a  maximum  average  of  499  employees  and 
wishing to make an offer to the public for a total consideration of less than EUR 20 million 
calculated on a 12 month period. 
Financial technology and technological innovation in the financial sector.   

The amount of capital in the public's hands and that can be freely traded 
A type of electronic trading often characterised by holding positions very briefly in order to 
profit  from  short  term  opportunities.  High  frequency  traders  use  algorithmic  trading  to 
conduct their business. 
Insider  dealing  arises  when  a  person  in  possession  of  inside  information  uses  it  to  deal,  to 
attempt to deal, or to recommend or induce another to do so. Dealing includes acquiring or 
disposing  of  financial  instruments  to  which  the  inside  information  relates,  as  well  as  to 
cancelling or amending an order concerning such a financial instrument.  
Information  of  a  precise  nature,  which  has  not  been  made  public,  relating  directly  or 
indirectly  to  one  or  more  issuers  or  to  one  or  more  financial  instruments;  and  which,  if  it 
were made public, would be likely to have a significant effect on the prices of those financial 
instruments or on the price of related derivative financial instruments. 
List drawn up by issuers indicating all persons having access to its inside information 
An  adviser  for  companies  applying  for  or  admitted  to  trading  on  an  MTF,  as  required  by 
certain stock exchanges across the EU 
A contract stipulated between an issuer and a financial intermediary, a credit institution or an 
investment company in force of which an issuer places a certain amount of own shares or a 
certain  sum  at  the  disposal  of  the  financial  intermediary  in  order  for  the  latter  to  carry  out 
purchase and sale operations on the issuer’s behalf.  
Regulation  (EU)  No  596/2014  on  market  abuse  and  repealing  Directive  2003/6/EC  of  the 
European  Parliament  and  of  the  Council  and  Commission  Directives  2003/124/EC, 
2003/125/EC and 2004/72/EC. 
According  to  Article  11  of  MAR,  market  soundings  are  defined  as  a  communication  of 
information,  prior  to  the  announcement  of  a  transaction,  in  order  to  gauge  the  interest  of 
potential  investors  in  a  possible  transaction  and  the  conditions  relating  to  it,  such  as  its 
potential size or pricing, to one or more potential investors. 
Directive  (EU)  2014/65  on  markets  in  financial  instruments  and  amending  Directive 
2002/92/EC and Directive (EU) 2011/61. 
A  multilateral  Trading  facility  is  a  trading  venue  where  companies  may  list  their  financial 
instruments, with lower regulatory requirements than on main regulated markets  
Persons closely associated with managers include: a) a spouse, or a partner considered to be equivalent 
to a spouse in accordance with national law;  b) a dependent child, in accordance with national law; c) a 
relative  who  has  shared  the  same  household  for  at  least  one  year  on  the  date  of  the  transaction 
concerned;    d)  a  legal  person,  trust  or  partnership,  the  managerial  responsibilities  of  which  are 
discharged by a person discharging managerial responsibilities or by a person referred to in point a), b) 
or  c)  above  or  which  is  directly  or  indirectly  controlled  by  such  a  person  or  which  is  set  up  for  the 
benefit of such a person or the economic interests of which are substantially equivalent to those of such 

82 

 
 
a person. 

Person 
Discharging 
Managerial 
Responsibilities 
(PDMR) 

A person discharging managerial responsibilities refers to a person within an issuer who is a) a member 
of the administrative, management or supervisory body of that entity; b) a senior executive who is not a 
member of the bodies referred to in point a), but who has regular access to inside information relating 
directly or indirectly to that entity and who has power to take managerial decisions affecting the future 
developments and business prospects of that entity 

Prospectus 
Regulation 

Small 
medium 
enterprises 

Regulation (EU) 2017/1129 on the prospectus to be published when securities are offered to 
the public or admitted to trading on a regulated market, and repealing Directive 2003/71/EC. 

and 
-sized 

Under  MiFID  II,  any  company  having  an  average  market  capitalisation  of  less  than  EUR 
200.000.000 on the basis of end-year quotes for the previous three calendar years. 

SME debt issuer 

SME 
Market 

Growth 

SME-dedicated 
MTF 
Tick size 

Under  Commission  Delegated  Regulation  (EU)  2017/565,  issuers  of  debt  instruments  only 
which,  according  to  their  last  annual  or  consolidated  accounts,  meet  at  least  two  of  the 
following three criteria: (i) an average number of employees during the financial year of less 
than  250;  (ii)  a  total  balance  sheet  not  exceeding  EUR  43  million;  and  (iii)  an  annual  net 
turnover not exceeding EUR 50 million. 
An MTF where at least 50% of the issuers whose financial instruments are traded on it are 
SMEs (defined as companies with a market capitalisation below EUR 200 million) and that 
has registered as an SME Growth Market. 
Multilateral trading facility dedicated to small and medium enterprises but not registered as 
an SME Growth Market 
Smallest increment in price that an exchange-traded instrument is permitted to move 

Turnover ratio 

Total trading volume on a market divided by total market capitalisation 

Wall crossing 

The act of making a person an “insider” by providing them with inside information 

83 

 
 
 
 
ANNEX 5: OUT-OF-SCOPE DRIVERS 

Beyond  the  drivers  identified  in  the  problem  definition,  the  demand  for  SME  financial 
instruments is also constrained by additional factors, such as the lack of visibility of SMEs 
towards institutional and foreign investors, or the tax treatment of investments in the various 
Member States. The supply of SME financial instruments is also constrained for instance by 
SMEs' lack of business education. These and other out-of-scope drivers are not addressed in 
the  current  initiative  focusing  on  targeted  technical  amendments,  but  are  considered 
progressively  in  the  wider  plan  to  facilitate  SME  access  to  public  markets  (see  section  on 
policy context, i.e. CMU). 

1. DEMAND SIDE 

1.1. Lack of visibility of SMEs towards institutional and foreign investors 

The  visibility  of  SMEs  is  constrained  by  both  the  lack  of  financial  research  coverage  on 
SMEs, and the use of local financial reporting standards. 

1.1.1 SME research  

Research  plays  a  key  role  in  equity  markets,  assisting  investors  in  making  informed 
investment  choices,  providing  absolute  and  relevant  evaluation  of  the  attractiveness  of  an 
individual  stock  or  a  whole  industry  or  market,  and  of  the  expected  performance  of  the 
underlying  company.  Equity  research  is  of  particular  importance  in  the  case  of  small  high-
growth  companies  where  information  is  scarce  and  harder  to  assess 218.  A  large  part  of 
professional  investors  would  not  engage  in  a  trade  on  either  primary  or  secondary  markets 
without relevant research being available. There is also a causal link between the liquidity of 
SME  shares  and  equity  research  coverage.  For  instance,  a  Peel  Hunt  and  Extel  Survey 
published in 2015 found that 78% of quoted companies responding see a correlation between 
the number of analysts writing on their company and the liquidity of their shares219.  

The weak provision of equity research220 on small and mid-sized companies (but also across 
the  board)  reduces  their  visibility  and  attractiveness  among  professional  investors 221.  In 
addition, stakeholders have repeatedly flagged – notably through various public consultations 
and workshops – that the recent MiFID II level 2 rules requiring the unbundling of research 
from  trading  commissions  could  have  further  detrimental  effects  on  the  financial  research 
coverage  of  SMEs.  The  Commission  has  already  committed  to  assessing  the  impact  of  the 
new rules on SME research through a dedicated study, to be launched in the second half of 
2018.  

218 OECD,  "Opportunities and  limitations  of  public  equity  markets  for  SMEs”,  OECD  Journal:  Financial  Market  Trends, 
Vol. 2015/1, 2016 
219 A  Peel  Hunt  and  Extel  Survey  published  in  2015  found  that  78%  of  quoted  companies  responding  see  a  correlation 
between the number of analysts writing on their company and the liquidity of their shares 
220 For  instance,  50%  of  companies  listed  on  Euronext  Amsterdam,  Brussels,  Paris  and  Lisbon  in  2015  (with  a  market 
capitalisation below EUR 1 billion) did not benefit from any financial research and 16% only had one analyst220. On First 
North  Sweden,  only  10%  of  listed  companies  were  covered  by  financial  analysis  in  2013220.  On  AIM  UK,  65%  of  the 
companies have zero or only one analyst's live opinion220. (Sources: Public consultation on CMU (Q2-AFG); Improving the 
Market  Performance  of  business  information  services  regarding  SMEs,  ECSIP  Consortium,  2013;  HM  Treasury  – 
Consultation on Financing Growth in innovative firms, August 2017) 
221 OECD,  "Opportunities and  limitations  of  public  equity  markets  for  SMEs”,  OECD  Journal:  Financial  Market  Trends, 
Vol. 2015/1, 2016 

84 

 
 
 
 
 
 
 
 
                                                 
1.1.2. The use of national accounting standards vs IFRS 

Except  in  few  cases 222 ,  the  listing  rules  of  SME-dedicated  MTFs  do  not  impose  the 
publication  of  financial  statements  in  International  Financial  Reporting  Standards  (IFRS). 
The  vast  majority  of  SME-dedicated  markets  offer  a  choice:  companies  can  either  use 
national GAAPs or IFRS for their financial statements. If SMEs want to stay local, they can 
use national GAAPs. On the contrary, companies that seek foreign capital often opt for IFRS. 
Currently, only the minority of SME issuers have adopted the IFRS223. 

However,  the  publication  of  financial  statements  in  IFRS  can  be  a  powerful  tool  to  attract 
foreign investors. The willingness of investors to conduct research on small issuers may be 
low,  especially  concerning  smaller  Member  States,  if  such  work  requires  comparison  of 
multiple  national  GAAPs 224 .  The  use  of  national  GAAPs  by  listed  SMEs  for  financial 
reporting  also  complicates  financial  analysis,  since  financial  analysts  need  to  familiarise 
themselves with all the details of national GAAPs225. A wider use of IFRS by smaller issuers 
might  enable  investors  and  financial  analysts  to  compare  cross-border  information  more 
easily.  On  the  other  hand,  making  the  use  of  IFRS  compulsory  would  place  an  enormous 
burden  on  issuers  listed  on  SME-dedicated  markets  (especially  in  the  smallest  Member 
States).  Without  prior  experience  of  capital  markets,  IFRS  can  be  a  hurdle  too  difficult  to 
overcome  for  small  companies,  as  the  costs  of  auditing  IFRS-prepared  financial  statements 
would  be  twice  as  high  as  the  costs  for  auditing  financial  statements  under  national 
GAAPs226. 

In  the  context  of  the  CMU  mid-term  review,  the  Commission  has  committed  to  continuing 
working  with  the  International  Accounting  Standard  Board  (IASB)  and  all  interested 
stakeholders  to  improve  International  Financial  Reporting  Standards  (IFRS)  acceptance  by 
developing an application toolbox and by clarifying disclosures for SMEs through the IASB's 
Disclosure Initiative. 

1.2. Tax treatment 

Tax  considerations  play  an  important  role  in  retail  investors’  portfolio  allocation  and 
can  foster  retail  participation  in  listed  SME  financial  instruments.  Several  Member 
States (such as Sweden, France, UK and Italy) have implemented tax incentives to encourage 
savings in equity, by providing tax reliefs on capital gains. Tax incentives in the UK, through 
the eligibility of AIM shares for inclusion in the ISA (Investor Saving Account), had a direct 
effect  in  freeing  up  more  than  GBP  4.5  billion  into  those  financial  instruments 227.  This 
extension  of  the  ISA  tax  relief  in  August  2013  was  designed  to  'stimulate  investment  in 

222 Three SME-dedicated markets impose the use of IFRS: AIM in the UK, Malta and Cyprus 
223 In 2016, one issuer out of the seven companies listed on First North Baltics had voluntarily opted for IFRS. In 2016, on 
Deutsche Börse's Entry Standard, 35% of issuers used IFRS while 65% of them used national GAAPs. On the German SME 
bond market, half of the issuers reported under IFRS (Source: Minutes of the European Commission workshops on 'Barriers 
to Listing for SMEs' (7 October and 8 December 2016) 
224 European Issuers, EVCA and FESE, EU IPO Report, 23 March 2015 
225 FESE, A blueprint for European Capital Markets, 2014 
226 Minutes of the European Commission workshops on 'Barriers to Listing for SMEs' (7 October and 8 December 2016). 
The  conversion of  financial  statements from  national  GAAPs to  IFRS  requires comfort  letters from  auditors  that  can cost 
from EUR 80,000 to EUR 200,000. Source: Panu Pikkanen, An Analysis of Aggregate Listing Costs on NASDAQ OMX 
Helsinki (2014) 
227 OECD,  "Opportunities and  limitations  of  public  equity  markets  for  SMEs”,  OECD  Journal:  Financial  Market  Trends, 
Vol. 2015/1, 2016 

85 

 
 
 
 
 
 
 
                                                 
smaller companies' and provide a bigger pool of funding for the growing businesses that are 
expected to drive economic recovery. Since 2017, Italy has implemented an individual saving 
account (piani individuali di risparmio), where 21% of the total assets should be invested in 
instruments issued by companies not included in the main Italian or EU indices. In France, 
the tax incentive to invest in quoted SMEs (the so-called "PEA-PME") would not a complete 
success,  despite  the  500,000  accounts  currently  opened  as  of  2016.  The  PEA-PME  would 
suffer from a lack of clarity as regards the definition of issuers that can fall under the scope of 
the  PEA-PME,  making  the  work  of  the  asset  manager  difficult 228 .  Many  stakeholders 
confirmed that such schemes are scarce in other Member States229. 

2. SUPPLY SIDE: LACK OF SME AWARENESS AND BUSINESS EDUCATION ON 
PUBLIC MARKETS  

SMEs  are  faced  with  a  prominent  educational  gap  when  it  comes  to  issuing  bonds, 
privately placing debt or tapping the equity markets230. This lack of education constrains 
the supply of companies seeking a listing in several ways. First, too few companies that have 
the potential to access capital markets appear to be aware of the short and long term benefits 
(and costs) of a listing of their shares or bonds231. It is not only a matter of limited awareness 
and understanding  about  individual instruments  (listed shares and bonds) but  also a lack of 
knowledge  on  how  those  different  funding  options  can  serve  different  financing  needs  at 
specific stages of the business cycle. Lack of education around the process of listing and life 
after an IPO or an IBO are important reasons for SMEs' reluctance to join capital markets. 

Second, many SMEs and their managers are not equipped with the skills required to face the 
process  of  issuance  on  public  markets.  When  going  public  or  issuing  bonds,  SMEs  need  a 
skillset that will allow them to assess the appropriateness of equity vs. debt finance for their 
business  model,  evaluate  their  options  and  respond  to  market  and  regulatory  requirements. 
The  necessary  skillset  consists  of  accounting,  financial  reporting,  business  planning, 
forecasting,  budgeting,  investor  relation  capabilities,  tax  planning,  and  knowledge  of  the 
regulatory environment232.  

Third,  in  addition  to  education  and  awareness  limitations,  the  reluctance  of  some  SMEs  to 
raise  public  financing  can  be  linked  to  the  fear  of  losing  control  of  the  business  to 
shareholders, the fear of being exposed to share price volatility, or to the aversion to sharing 
sensitive  information.  Limited  understanding,  incomplete  preparation  as  well  as  lack  of 
confidence  to  go  through  the  offering  process  results  in  SMEs  not  envisaging  or  being 
prepared to issue shares or bonds, driving down the supply of such instruments233. 

228 Workshops organised by the Commission on  barriers to SME listing (2016) 
229 Feedback received from stakeholders through the public consultation as well as during technical workshops organised by 
the Commission on regulatory barriers to SME listing 
230 OECD, Opportunities and Constraints of Market-based financing for SMEs, September 2015 
231 OECD, New Approaches to SME and Entrepreneurship financing: Broadening the range of Instruments, 2015 
232 OECD, Opportunities and Constraints of Market-based financing for SMEs, September 2015 
233 OECD, New Approaches to SME and Entrepreneurship financing: Broadening the range of Instruments, 2015 

86 

 
 
 
 
 
 
 
 
 
                                                 
ANNEX 6: DISCARDED OPTIONS 

Several  potential  adjustments,  initially  included  in  the  public  consultation  "Building  a 
proportionate  regulatory  environment  to  support  SME  listing",  have  been  discarded  after 
preliminary analyses, due to either lack of evidence, lack of overall support, market integrity 
risks  or  potential  additional  costs  to  issuers.  These  options  include  requiring  key  advisers, 
harmonising delisting rules on SME Growth Markets, simplifying transfers of listing from a 
regulated to an SME Growth Market, reducing disclosure requirements of inside information 
by  SME  Growth  Market  bond  issuers,  and  amending  the  tick-size  regime  applicable  to 
securities listed on SME Growth Markets. 

1. Requiring a key adviser for equity issuers on SME Growth Markets 

Key  advisers  play  a  prominent  role  by  assessing  the  company's  suitability  for  the  market, 
bridging  the  information  gap  between  quoted  SMEs  and  investors  and  upholding  the 
reputation  of  the  market.  One  option  could  have  been  to  require  a  key  advisor,  notably  for 
equity issuers for a limited period of time. Half of the respondents to the public consultation 
considered that such a key advisor should be imposed while the others were opposed to such 
an obligation. The majority of respondents also considered that the missions and obligations 
of key advisors should be determined by local listing rules rather than EU law. Finally, even 
if the vast majority of SME markets already require such a key adviser for equity issuers, this 
measure  could  be  seen  as  adding  a  (significant)  cost  on  SME  Growth  Market  issuers  and 
therefore,  clearly  contradicting  one  of  the  objectives  of  the  proposal,  i.e.  to  alleviate  the 
burden on SMEs. 

2. Delisting rules on SME Growth Markets  

Investors  can  be  deterred  from  investing  in  the  first  place  (especially  in  a  cross-border 
context) because they might face difficulty to gain full control of a listed SME and delist its 
shares.  Likewise, some companies can be deterred from going public because they consider 
that  a  listing  of  their  shares  is  a  'one  way  ticket'  and  cannot  come  back  to  their  previous 
(unlisted) situation. The rules on delisting are not harmonised at EU level and the situation of 
minority shareholders can be weakened in case of voluntary delisting234.  

One option could have been to propose minimum harmonised rules on voluntary delistings. 
However, the public consultation has not shown any market failure as regards delisting rules 
that  would  require  EU  action.  The  respondents were  split  over  this  question, some  of  them 
underlining that there was no clear benefit for a harmonised framework; (ii) the replies to the 
public  consultation  do  not  provide  with  a  lot  of  insights  on  how  a  harmonised  framework 
should be built. 

3. Transfer of listings from regulated markets to SME Growth Markets   

One  option  could  have  been  to  create  a  framework  facilitating  the  transfers  from  regulated 
markets  to  SME  Growth  Markets.  Such  a  harmonised  EU  framework  could  in  principle  (i) 
reduce the administrative burden on SMEs listed on regulated markets by making it easier for 
them to move to a trading venue with lighter requirements; (ii) safeguard investors’ interests; 

234 For instance, some institutional investors may be prohibited from holding unquoted shares. A delisting also changes the 
way  a  company  is  run  as  going  private  implies  a  lower  level  of  regulatory  requirements.  When  the  delisting  decision  is 
announced, shareholders may try to sell their shares as soon as possible, which can result in a decline in share price.   

87 

 
 
 
 
                                                 
and  (iii)  enhance  the  competition  between  exchanges  (as  in  general,  the  existing  rules  on 
transfer  of  listing  facilitate  the  transfer  of  listing  between  trading  venues  operated  by  the 
same market operator). However, respondents to the public consultation were split over the 
opportunity to create rules on transfers, some of them arguing that such rules should be left to 
the  discretion  of  Member  States  and  local  exchanges.  No  regulatory  or  market  failure  was 
identified in terms of downward transfers, as there have been 177 transfers of listings from 
the  regulated  markets  to  SME  Growth  Markets  since  2006235 and  none  of  the  stakeholders 
have raised any concerns as regards such transfers. 

4. Disclosure of inside information by SME Growth Market bond issuers 

In  the  past,  some  stakeholders  argued  that  the  disclosure  of  all  inside  information  (either 
positive or negative) by debt issuers would only be burdensome while not justified, as plain 
vanilla bonds are less exposed to risks of market abuse due to the nature of the instrument. 
While  the  prices  of  equity  financial  instruments  can  be  influenced  by  the  publication  of 
(negative or positive) inside information about the firm, the key variables that would impact 
the  price  of  plain  vanilla  bonds  would  be  market  risk,  liquidity  risk  and  credit  risk. 
Bondholders would not be able to act on those variables while the only factor that could be 
influenced by the issuer is the likelihood of default. The public consultation raised a question 
on  whether  or  not  the  disclosure  of  information  by  debt-only  issuers  should  be  limited  to 
information  likely  to  impair  their  ability  to  repay  their  debt  (rather  than  all  inside 
information).  A  majority  of  respondents  that  replied  to  this  question  were  in  favour  of  this 
solution. However, given the definition of inside information provided by MAR, debt issuers 
can already limit their disclosure of information to those likely to have an impact on the price 
of  its  financial  instruments236.  In  no  ways,  they  have  the  duty  to  disclose  all  information. 
Moreover,  some  studies  showed  that  positive  inside  information  (such  as  a  takeover 
announcement 237 or  the  upgrade  of  a  rating 238)  can  have  an  effect  on  bond  price.  As  a 
consequence, it does not seem advisable to limit the disclosure to information likely to impair 
the ability of a non-equity issuer to repay its debt.  

5. Tick size regime for SME Growth Markets  

While lower tick sizes would contribute to the reduction in trading costs, tick sizes also have 
an  impact  on  the  spread  between  sellers  and  buyers  of  securities  and  consequently  may 
influence  the  incentives  of  intermediaries  (brokers)  to  trade  those  instruments  and  earn 
income from their activity. The public consultation raised a question about the impact of the 
EU  minimum  regime  on  tick  sizes  on  the  liquidity  and  spreads  of  SME  Growth  Market 
shares.  A  significant  number  of  respondents  refrained  from  expressing  an  opinion.  A  thin 
majority of those who expressed an opinion considered that the EU minimum tick size regime 
leads  to  a  decline  in  liquidity  and  spreads  but  cautioned  against  a  revision  of  the  tick  size 
regime until further evidence is available. A thin majority of those who expressed an opinion 

235 Since 2006, there have been 177 transfers of listings from the regulated markets to SME Growth Markets (Source: Data 
from Securities Exchanges – Commission analysis). 
236 Article  7  of  MAR  defines  an  inside  information  as  ''information  of  precise  nature,  which  has  not  been  made  public, 
relating, directly or indirectly, to one or more financial instruments, and which if it were made public, would be likely to 
have a significant effect on the prices to those financial instruments or on the prices of those financial instruments or on the 
price of related derivative financial instruments'. 
237 S.  Kedia  and  X.  Zhou,  Insider  Trading  and  Conflicts  of  Interest:  Evidence  from  Corporate  Bonds,  2009.  The  authors 
have found that 'target bonds rated below the acquirer’s earn significant positive returns while those rated no lower than the 
acquirer’s experience significant negative returns'. Finally,  
238 Commission Technical workshop on 'regulatory barriers to SME listing', 28 November 2017 

88 

 
 
 
 
                                                 
indicated  that  more  flexibility  should  be  given  as  regards  the  tick  size  regime  applying  to 
SME Growth Market issuers.  

At  the  current  juncture,  the  modification  of  the  tick  size  regime  for  SME  Growth  Markets 
(either  by  raising  the  tick  size  for  SME  shares  or  by  exempting  them  from  the  MiFID  II 
harmonised  regime)  cannot  be  envisaged  as  a  policy  option:  (i)  few  months  after  the  entry 
into application of MiFID II, there is a lack of evidence on the potential consequences of the 
tick size regime on shares’ liquidity. Some stock-exchanges said that it led to a decrease in 
liquidity while others expressed the opinion that the framework led to a slight increase; (ii) 
the current MiFID II regime only  imposes a  minimum tick size regime, meaning that SME 
Growth  Market  operators  still  have  the  possibility  to  raise  tick  sizes  if  they  consider  the 
current levels too low and impairing liquidity provision.  

For more details on tick size, please refer to annex 9.  

89 

 
 
 
 
 
 
 
ANNEX 7: ADDITIONAL MARKET BACKGROUND 

 Although the distribution varies among the different SME equity markets across the EU, it is 
widely  viewed  that  retail  investors  account  for  a  much  higher  share  of  the  investor  base  in 
companies  listed  on  SME-dedicated  MTFs  than  in  those  on  regulated markets239.  The  table 
below provides a comparison between a selection of SME equity markets and main markets 
in the EU: 

Figure 13 – Distribution of retail and institutional investors in selected EU MTFs vs. regulated markets 

Type of 
Market 
SME Market 
SME Market 
SME Market 
SME Market 

Name of the Market 

AIM (UK) 
New Connect (PL) 
First North (SE) 
EN.A (EL) 

Main Market  Warsaw Stock Exchange (PL) 
Main Market 
Main Market 

NASDAQ OMX (SE) 
ATHEX (EL) 

Retail 
investors 
50% 
95% 
81% 
78% 
10% 
45% 
36% 

Institutional investors 

50% 
5% 
19% 
22% 
90% 
55% 
64% 

Source:  ECSIP  Consortium,  Improving  the  market  performance  of  business  information  services  regarding  listed  SMEs 
(2013); OICV, SME Financing through capital markets (2015) 

There  is  also  a  lack  of  cross-border  investments  in  SME-dedicated  markets.  Domestic 
investors  are  usually  the  ones  who  invest  in  SMEs240.  SME-dedicated  markets  present  a 
strong home-bias, compared to main markets, as highlighted by the table below: 

Figure 14 – Distribution of domestic and foreign investors in selected EU MTFs vs. regulated markets 

Name of the 
Market 

Type of Market 

Domestic Investors 

Foreign Investors 

SME Market 
SME Market 
SME Market 
SME Market 
SME Market 
Main Market 

AIM (UK) 
New Connect (PL) 
First North (Nordics) 
MAB (ES) 
EN.A (EL) 
LSEG (UK) 
Warsaw Stock 
Exchange (PL) 
NASDAQ OMX (SE) 
BME (ES) 
ATHEX (EL) 
Source: European Commission data collected from securities exchanges, 2017 

58% 
93% 
84% 
89% 
91% 
44% 
48% 

Main Market 
Main Market 
Main market 

30% 
57% 
36% 

Main market 

43% 
7% 
16% 
11% 
9% 
56% 
52% 

70% 
43% 
64% 

239 ECSIP Consortium, Improving the market performance of business information services regarding listed SMEs (2013) 
240 European Issuers, FESE and EVCA, EU IPO Report, March 2015 

90 

 
 
 
 
 
 
 
 
 
 
 
                                                 
 Figure 15 – Free float requirement and minimum capitalisation on EU SME-dedicated MTFs 

Name of the Market 
Dritter Market (AT) 
Marché Libre (FR) 
Cyprus 
Companies Market (CY) 

Emerging 

Free float requirement 

No minimum free float 
No minimum free float 
No minimum free float 

Progress (HR, SI) 

10 per cent 

Prague  Stock  Exchange  – 
START (CZ) 

ATHEX EN.A (EL) 

No minimum free float  

Free float at 10 per cent (provided at least 50 people).   

AIM Italia (IT) 

10 per cent 

Irish  Stock  Exchange  IEX 
Securities 
(Enterprise 
Market) (IE) 

No minimum free float but minimum capitalisation at EUR 5 
million 

NewConnect (PL) 

15 per cent 

Alternativo 

Mercado 
Bursatil (ES) 
NASDAQ 
OMX/First 
North  (DK,  EE,  FI,  LT, 
LV, SE) 

At least EUR 2 million free float. 

10 per cent of shares in public hands, or an assigned Liquidity 
Provider. 

AIM (UK) 

No minimum requirement. 

Aktietorget AB (SE) 

At least 200 shareholders with at least 10 per cent of shares in 
public hands. 

Nordic  Growth  Market 
(SE) 

At least 300 shareholders; at least 10 per cent of shares and 10 
per cent of votes in public hands.  Minimum share capital of not 
less than EUR 730,000. 

Euronext  Growth 
FR, PT) 

(BE, 

EUR 2.5 million 

Scale (DE) 

AeRO (RO) 

20 per cent or EUR 1 million  

10 per cent 

91 

 
 
 
 
ANNEX  8:  THE  IMPACT  OF  DEVELOPED  SME  GROWTH  MARKETS  ON  THE  WHOLE 
FUNDING ESCALATOR OF COMPANIES   

  Vibrant SME Growth Markets as a condition to developed Private Equity, Venture 

Capital and Crowdfunding financing 

Dynamic  public  equity  markets  can  foster  the  development  of  private  equity  and  venture 
capital  financing.  Healthy  public  equity  markets  can  stimulate  private  equity  and 
venture  capital  activity  by  providing  smooth  exit  opportunities241.  Venture  capital  and 
private equity funds have a fixed term mandate for the assets they manage and typically do 
not  pay  dividends  during  the  investment  lifecycle 242 .  The  capital  they  offer  to  growth 
companies  must  ultimately  be  turned  into  cash  or  into  a  currency  such  as  publicly  traded 
equity that can ultimately sold for cash243. Without this possibility to exit, VC and PE funds 
are  less  willing  to  lock-in  their  money  and  time  during  the  critical  growth  period  of  the 
enterprise.  The  money  they  receive  through  the  exit  may  be  used  to  invest  in  other  high 
growth businesses244. Some studies have shown that private equity financing cannot thrive in 
the absence of a 'well-developed stock market that permits venture capitalists to exit through 
an initial public offering'245 and that a venture capital industry and stock market development 
are positively correlated246.  

However,  currently,  the  EU  SME-dedicated  markets  do  not  provide  a  stable  exit 
mechanism for venture capitalists and private equity funds. In 2016, venture capital and 
private  equity  funds  in  the  EU  disinvested  from  1,295  early  stage  companies  representing 
EUR 2.4 billion of divestment. The most common exit route was a trade sale (i.e. the sales of 
a company's shares to industrial investors  - 27% of transactions) while 17% of transactions 
were written-off (i.e. the value of the investment is eliminated and the return to investors is 
zero or negative). Only 7.5% of the exits were through the public markets. In 2016, buy-out 
funds  disinvested  from  790  more  mature  and  less  risky  companies  representing  EUR  28.1 
billion. Those companies were sold to another private equity fund (31%) and or divestments 
went  through  trade  sales  (28%).  Only  11%  of  those  companies  were  brought  to  the  public 
markets.  Even  in  the  cases  where  a  trade  sale  is  favoured  over  an  IPO,  the  value  of  a 
company  would  be  enhanced  if  the  venture  capital  and  private  equity  funds  would  be 
provided with an alternative credible solution to sell their stakes in a VC-backed company247. 
In  most  cases,  the  possibility  of  listing  shares  on  an  SME-dedicated  market  may  not  be 
sufficient: venture capitalists also need active trading of SMEs shares, as liquidity is critical 

241 OECD,  "Opportunities and  limitations  of  public  equity  markets  for  SMEs”,  OECD  Journal:  Financial  Market  Trends, 
Vol. 2015/1, 2016 
242 Felice B. Friedman and Claire Grose, Promoting Access to Primary Equity Markets A Legal and Regulatory Approach, 
World Bank Policy Research Working Paper 3892, 2006 
243 European  Private  Equity  and  Venture  Capital  Association,  Fulfilling  the  Promise  of  Venture-Backed  High  Potential 
Companies, p.3 
244 OECD,  "Opportunities and  limitations  of  public  equity  markets  for  SMEs”,  OECD  Journal:  Financial  Market  Trends, 
Vol. 2015/1, 2016 
245 Black, B.S., and R.J.Gilson, Venture capital and the structure of capital markets: Banks versus stock markets (1997) 
246 Felice B. Friedman and Claire Grose, Promoting Access to Primary Equity Markets A Legal and Regulatory Approach, 
World Bank Policy Research Working Paper 3892 (2006), p. 29 
247 (InvestEurope, 2016 European Private Equity Activity) 

92 

 
 
 
 
                                                 
to  enable  investors  to  come  out  of  investment  positions  without  significantly  impacting  the 
stock price248.  

Public equity markets for SMEs could also stimulate equity crowdfunding investments. Like 
venture capitalists, equity crowdfunding investors also seek an exit for their investment and 
therefore require well-functioning and liquid equity markets to be used as exit routes for the 
growth  companies  they  back249.  However,  at  present,  there  is  no  real  secondary  market  for 
crowdfunding exits250. Only a couple of crowdfunding transactions in the EU have ended up 
in IPOs on SME-markets251. As a consequence, a limited SME access to public markets has 
repercussions not only on capital-raising through IPOs, but throughout the funding escalator 
of companies. 

  Ripple effect on regulated markets 

A  weak  pipeline  of  SME  IPOs  also  raises  issues  in  terms  of  market  structure  of  the 
European  Markets.  The  chart  below  represents  changes  observed  in  the  number  of  listed 
companies (either on a regulated market or on a SME-MTF) by market capitalisation segment 
from 2006 to 2016, based on the following segmentation in several EU jurisdictions252:  

Figure 16 – Evolution of market capitalisation segments 

Source: The 2017 Small & Mid-Cap Outlook, Middlenext & Financière de l'Echiquier 

This  chart  shows  that  the  number  of  listed  European  companies  peaked  in  2007  and  the 
lowest  point  was  recorded  in  2013.  Although  this  may  come  as  no  surprise  in  the  crisis 
context, this development has been accompanied by structural changes. Since 2007, the three 
smallest  segments  (Nano  caps:  -15%;  Micro:  -29%;  Small:  -16%)  have  contracted  whereas 
the three largest have increased (Midcaps: +8%; Large: +32% and blue chips: +11%). While 
the  mid  and  large caps segments  continue to  receive  a  boost  from  the  strong  growth  in  the 

248 European  Private  Equity  and  Venture  Capital  Association,  Fulfilling  the  Promise  of  Venture-Backed  High  Potential 
Companies, 2005 
249 OECD,  "Opportunities and  limitations  of  public  equity  markets  for  SMEs”,  OECD  Journal:  Financial  Market  Trends, 
Vol. 2015/1, 2016 
250 AFME, The Shortage of Risk Capital for Europe’s High Growth Businesses, 2017 
251 Two examples of successful exit is the IPO of Free Agents Holdings on the London Stock Exchange's AIM in November 
2016 and the IPO of Heeros Oyj on First North Helsinki (November 2016).  
252 UK, Germay, Italy, Spain, Belgium, Netherlands, Belgium, Luxembourg, Switzerland, Austria, Spain, Portugal 

93 

 
 
 
 
 
 
                                                 
micro/small caps segments in the 2000s, the micro-caps segment which depends exclusively 
on  IPOs  is  continuing  to  contract  due  to  a  larger  number  of  delistings  whether  linked  to 
mergers  and  acquisitions  activity  or  the  companies'  growth  resulting  in  the  transfer  to  the 
small cap segment. Therefore, European listed companies have continued to age since 2007, a 
phenomenon that is reflected by the growth of the mid and large capitalisation segments that 
have  reached  a  peak,  fuelled  by  the  transfer  from  one  segment  to  another 253.  Thus,  the 
narrowing  base  of  the  pyramid  (micro/small  cap)  that  has  been  witnessed  since  2007 
could  have  an  impact  on  the  top  of  the  pyramid  (mid/large)  in  the  longer  run.  The 
reduction  in  the  pipeline  of  potential  growth  success  stories  (i.e.  nano/micro  capitalisation 
segments) could lead to the stagnation, followed by a contraction of the large and blue-chips 
segments. In the long run, any durable contraction in these segments could be problematic for 
market  intermediaries,  whose  business  models  are  highly  dependent  on  trading  volumes  of 
the large and blue-chips segments and have a major impact on the financial industry. 

253 MiddleNext and La Financière de l'Echiquier, The 2016 European Small and Mid Cap Outlook, 2016  

94 

 
 
 
 
 
                                                 
ANNEX 9: BUSINESS MODELS OF SME BROKERS AND LIQUIDITY ISSUE 

Brokers  have  a  business  model  based  on  traded  volumes.  Each  time  an  investment 
management company places an order, the broker charges an average percentage commission 
of 0.1-0.15% for the provision of this service. As SMEs trade in very thin volumes, smaller 
capitalisation segments pose an economic issue for the brokers. The tables below demonstrate 
that over the period 2006-2016, a nano-cap (an issuer whose market capitalisation is below 
EUR  50  million)  and  a  micro-cap  (an  issuer  whose  market  capitalisation  ranges  between 
EUR 50 and 150 million) generated on average EUR 1,000 and EUR 6,600 in brokerage fees 
over one year for all the brokers (buy and sell trades), compared to EUR 4.25 million for a 
blue-chip.  The  fees  generated  by  the  smaller  trading  segments  are  therefore  insufficient  to 
remunerate  brokers  specialised  in  SMEs  that  bear  fixed  high  costs  and  are  often  locally-
based254.  

Figure 17 – Average brokerage fees by market capitalisation 

254 MiddleNext and La Financière de l'Echiquier, The 2016 European Small and Mid Cap Outlook, 2016 

95 

 
 
 
 
 
 
 
 
 
 
 
 
                                                 
ANNEX  10:  IMPLICATIONS  OF  THE  EUROPEAN  TICK  SIZE  REGIME  FOR  LIQUIDITY  ON 
SME GROWTH MARKETS 

Tick  size  refers  to  the  smallest  increment  in  price  that  an  exchange-traded  instrument  is 
permitted to move. As the determinant of the granularity of price changes, it directly affects 
the price discovery process and holds wider implications for both market quality and market 
structure. In particular, tick sizes have been demonstrated to impact liquidity, volatility and 
trading  costs.  As  such,  they  are  an  important  factor  impacting  the  attractiveness  of  SME 
growth  shares,  which  generally  suffer  from  lower  liquidity  levels,  and  higher  trading  costs 
and volatility compared to large caps.      

While attracting little attention before the advent of electronic trading, tick sizes have become 
a  hotly  debated  topic  since  the early  2000's,  especially in  the  context  of  liquidity  provision 
via high frequency trading (HFT) strategies. Prior to the application of MiFID II, European 
exchanges were allowed to freely calibrate their tick size. As smaller tick sizes were seen to 
lead to a decline in quoted spreads and attract HFT trading flow there has been a continuous 
trend  of  ever-declining  tick  sizes  over  the last  two  decades255.  In  order  to  put  a  halt  to  this 
'race  to  the  bottom'  the  European  Parliament's  ECON  Committee  report  on  MiFID  II 
introduced  an  additional  Article 256  to  establish  mandatory  tick-sizes  across  all  European 
exchanges.  This  Article  was  maintained  in  the  co-legislative  procedure  and  required  the 
Commission to specify a minimum tick size regime via a Delegated Regulation257 (see figure 
18 for current calibration). This regime is intended to create a level-playing field between the 
different trading venues and ensure the orderly functioning of the market.     

Given that the tick size regime was not part of the MiFID II / MiFIR Commission proposal, 
no prior assessment was carried out to analyse the impact and effectiveness of this measure. 
In  particular,  it  remains  unclear  to  date  whether  the  mandatory  tick  sizes  have  been 
adequately  calibrated  to  best  suit  the  liquidity  levels  of  traded  shares258.  This  is  especially 
true for less liquid shares, such as the vast majority of SME shares.  

For  liquid  instruments,  a  smaller  tick  size  generally  enhances  the  prices  discovery  process. 
The  increased  price  granularity  allows  market  makers  to  set  their  bid-ask  spreads  more 
precisely according to perceived risks. This process is mainly driven by HFTs that are able to 
update  their  quotes  at  an  extremely  high  pace and  leads  to  a  decline  in  quoted  spreads  and 
thus transaction costs259.      

For  illiquid  financial  instruments,  such  as  most  SME  shares,  this  principle  does  not  hold. 
Liquidity  provision  in  these  shares  is  mainly  driven  by  genuine  investor  interest  and 
specialised or dedicated market makers rather than HFTs. Since there is little trading activity 

255 While the Federation  of European  Securities  Exchanges  (FESE)  sets  out  a  self-regulatory  tick  size  regime,  this  regime 
was not binding and not all FESE members followed it fully across the different markets they operated.    
256 See Article 49 MiFID II  
257 See Commission Delegated Regulation 2017/588 of 14 July 2016 supplementing Directive 2014/65/EU of the European 
Parliament and of the Council 
258 While ESMA consulted on RTS 11 and carried out extensive calculations to calibrate the tick sizes across the different 
liquidity bands, it is extremely difficult to accurately predict what effect they will have based on theoretic models.   
259 It should be noted that a law of diminishing return applies to this concept. Ever decreasing tick sizes will lead to smaller 
and smaller improvements in quoted spreads. At the same time, the order messaging rate will tend to increase exponentially 
with potential detrimental impacts on the stability of data connections and matching engines of market operators.    

96 

 
 
 
 
 
 
 
                                                 
overall  and volatility  tends  to  be  higher,  market  makers  generally  require larger  margins  in 
order to make their quoting activity economical. This leads to higher spreads and increased 
trading costs. While a smaller tick size should equally enhance the price discovery process, 
the  additional  price  points  made  available  will  do  little  to  impact  spreads  as  they  are 
significantly  larger  than  the  tick  size.  In  addition,  a  smaller  tick  size  may  reduce  the 
profitability  of  market  makers  if  they  are  unable  to  provide  competitive  quotes  at  more 
granular price points. In effect, liquidity may actually decrease.  

The  stakeholder  consultation  to  this  initiative  also  asked  respondents  to  comment  on  the 
effect  of  the  European  tick  size  regime.  In  particular,  respondents  were  asked  whether 
increased  or  more  flexible  tick  sizes  on  SME  GMs  could  enhance  liquidity.  The  replies  to 
these  questions  did  not  result  in  any  conclusive  result.  While  some  respondents  noted  that 
they  expect  the  European  tick  size  regime  to  have  a  negative  impact  on  liquidity,  others 
commented that smaller tick sizes lead to narrower spreads and decreased trading costs. One 
stakeholder expressed the observation that smaller tick sizes in fact increase liquidity at the 
touch  but  that  this  was  only  due  to  the  reduced  number  of  possible  price  points  which 
concentrate volumes at the best bid and offer. Overall however, market book depth decreased. 
The  majority  of  respondents  stated  that  the  effects  are  currently  unclear  given  the  recent 
introduction of the regime.  

Since there is no conclusive evidence on the effects at this stage, it appears prudent to build 
any  assessment  on  a  longer  observation  period.  The  tick  size  regime  is  ultimately  a 
calibration issue and it will require time before the effects of its implementation become fully 
visible. Too small tick sizes will make the costs of overbidding best bid/offers insignificant 
and  will  thus  create  excessive  noise  in  the  order  book.  Likewise,  too  large  tick  sizes  will 
increase the viscosity of the order book which can discourage  the placing of passive orders 
and  increase  the  costs  of  aggressive  ones.  A  balanced  and  well-calibrated  approach  is 
therefore needed.  

Increasing the tick size for SME GMs  at the current stage also appears inappropriate given 
the  wider  regulatory  framework.  As  systematic  internalisers  (SIs)  are  currently  not  covered 
by the MiFID II tick size regime, operators are able to price improve within the tick in order 
to attract trading flows. This effect would be even more pronounced if larger tick sizes were 
implemented  on  other  markets  and  SIs  would  be  able  to  attract  even  more  transactions260. 
This would undermine a primary objective of MiFID II given that the bilateral trades on SIs 
are less transparent than lit multilateral public markets. Any regulatory measures in relation 
to the tick size regime should therefore also establish a level playing field across all types of 
execution venues.    

Given  the  current  lack  of  evidence  on  the  impact  of  the  tick  size  regime  and  the 
considerations of the wider regulatory framework, it was decided that it would be premature 
to propose any changes to the regime at the current point in time. Commission services will 
however continue to monitor the impacts in order to propose regulatory amendments if and 
where necessary in the future.  

260 Trading flows have already increased by more than 100% in the first two months of 2018, compared to the average in Q4 
2017 (Source: Fidessa) 

97 

 
 
 
 
 
 
 
 
 
                                                 
Figure 18 – Tick sizes mandated by Commission Delegated Regulation 2017/588 for liquidity bands and price 
ranges respectively  

98 

 
 
 
 
 
ANNEX 11: MARKET ABUSE DATA RECEIVED FROM NATIONAL COMPETENT AUTHORITIES 

FMA  
(AT) 

FSMA  
(BE) 

HANFA 
(HR) 

CySec  
(CY) 

CNB 
(CZ) 

Finans 
tilsynet 
(DK) 

FIN-
FSA 
(FI) 

Bafin 
(DE) 

HCMC 
(EL) 

MNB 
(HU) 

Consob 
(IT) 

Finanst
ilsynet 
(NO) 

CMV
M 
(PT) 

FSA 
(RO) 

NBS 
(SK) 

SMA 
(SI) 

Finans 
inspekti
onen 
(SE) 

CNMV 
(ES) 

FCA  
(UK) 

1 / 130 

7 / 
24 

1 / 
22 

1 / 
65 

1 / 
1 

1 / 
14 

1 / 
27 

10 / 
≈950 

1 / 
12 

1 / 
21 

11 / 
1529 

1 / 
17 

2 / 
34 

1 / 
301 

1 / 
53 

n/a 

3 / 724 

4 / 
153 

54 / 
247 

24 

3 

0 

0 

0 

3 

5 

694 

1 

0 

52 

7 

1 

4 

0 

n/a 

412 

18 

440 – 
500 

1 

1 

0 

0 

0 

0 

24 

104 

0 

0 

46 

15 

0 

0 

0 

n/a 

1800 

0 

164 

1 

1 

0 

0 

0 

0 

0 

appro
≈5 

0 

0 

1 

1 

0 

6 

0 

n/a 

0 

0 

n/a 

538 

1635 

253 

3 

104 

1337 

1840 

2757 

N/A 

203 

1276 

2645 

5656 

350 

1 

n/a 

11186 

1117 

39655 

40 

16 

0 

0 

0 

6 

260 

543 

71 

0 

369 

38 

0 

90 

0 

n/a 

3207 

193 

4084 

Number  of  MTFs  /  MTF 
issuers 
your 
in 
jurisdiction  as  of  31 
December 2017 
MAR Article 16 : number 
of  STORs 
in 
concerning 
2017 
specifically 
financial 
instruments of issuers on 
MTFs 

received 

MAR  Article  17(4) 
: 
number  of  notifications 
to delay the disclosure of 
information 
inside 
2017 
in 
received 
originating 
specifically 
from issuers on MTFs 

MAR Article 18 : number 
of  requests  to  receive 
insider  lists  addressed  by 
the  national  competent 
authority  specifically  to 
issuers on MTFs in 2017. 
MAR  Article  19  :  total 
number  of  managers' 
transactions  notifications 
received in 2017 (from all 
issuers) 
MAR Article 19 : number 
managers' 
of 
transactions  notifications 
in 
received 
2017 
originating 
specifically 
from issuers on MTFs 

99 

 
 
 
ANNEX 12: DETERMINING THE APPROPRIATE DEBT ISSUANCE SIZE TO DEFINE AN SME 
ISSUER ON DEBT-ONLY SME GROWTH MARKETS 

The  purpose  of  adjusting  the  SME  debt  issuer  definition  is  to  enable  exchanges  to  register 
their junior debt markets as SME Growth Markets. As the current criteria are too restrictive to 
be representative of the companies actually using these markets, many exchanges mentioned 
through the public consultation (and during dedicated workshops organised by DG FISMA) 
that they did not wish to register their junior bond segments as SME Growth Markets under 
the current definition. As a result, debt-only issuers cannot benefit from the alleviations we 
are trying to put in place. In this respect, looking at the current average on SME debt markets 
makes sense from a market access perspective. 

In  order  to  better  assess  the  situation  of  MTFs  dedicated  to  small  and  mid-caps  in  the  EU, 
Commission  services  collected  data  directly  from  European  securities  exchanges  on  their 
SME-dedicated segments. Based on the number of issuances and total nominal value of debt 
issuances,  the  average  issuance  size  could  be  calculated  for  several  SME-dedicated  bond 
MTFs as follows: 

  Average new single issuance value per year (EUR million): 

Euronext (FR,BE) 

First North (Nordics) 

DBAG (DE) 

EN.A (EL) 

AIM (IT) 

NewConnect (PL) 

AeRO (RO) 

MARF (ES) 

Total 

2012 
5,8 

N/A 

N/A 

N/A 

N/A 

N/A 

N/A 

N/A 

5,8 

2013 
36,3 

3,2 

29,8 

N/A 

N/A 

N/A 

N/A 

50 

24,4 

2014 
31,8 

14,5 

37,5 

N/A 

N/A 

N/A 

N/A 

14 

20,2 

  Average number of issuances per issuer per year: 

Euronext (FR,BE) 

First North (Nordics) 

DBAG (DE) 

EN.A (EL) 

AIM (IT) 

NewConnect (PL) 

AeRO (RO) 

MARF (ES) 

Total 

2012 
1,1 

N/A 

N/A 
N/A 

N/A 

N/A 

N/A 

1,1 

1,1 

2013 
1,3 

1,3 
N/A 

N/A 

N/A 

N/A 

N/A 

1,0 

1,3 

2014 
1,3 

1,2 
N/A 

N/A 

N/A 

N/A 

N/A 

2,2 

1,4 

2015 
56,6 

2, 

38,9 

N/A 

N/A 

N/A 

0,9 

16,3 

12,3 

2015 
1,4 

1,1 
N/A 

N/A 

N/A 

N/A 

0,0 

2,0 

1,4 

2016 
117 

4,6 

28,7 

4 

N/A 

16,8 

0,8 

9,6 

14,4 

2016 
1,5 

1,2 

N/A 

1,0 

N/A 

2,4 

0,0 

2,2 

2,0 

2017 
109 

2,6 

50 

6 

N/A 

20,5 

0,7 

12,4 

15,3 

2017 
1,4 

7,2 

1,4 

2,0 

N/A 

2,8 

0,0 

2,5 

4,0 

  Average value of total issuances per issuer per year (EUR million): 

100 

 
 
 
 
Euronext (FR,BE) 

First North (Nordics) 

DBAG (DE) 

EN.A (EL) 

AIM (IT) 

NewConnect (PL) 

AeRO (RO) 

MARF (ES) 

Total 

2012 

6,5 
N/A 

N/A 

N/A 

N/A 

N/A 

N/A 

N/A 

6,5 

2013 

46,3 

4,0 

N/A 

N/A 

N/A 

N/A 

N/A 

50,0 

30,9 

2014 

42,9 

16,6 
N/A 

N/A 

N/A 

N/A 

N/A 

30,5 

28,6 

2015 

76,6 

2,1 

N/A 

N/A 

N/A 

N/A 

0,0 

33,4 

17,5 

2016 

171,2 

5,7 

N/A 

4,0 
N/A 

40,2 

0,0 

20,9 

28,5 

2017 

157,2 

18,9 

68,2 

12,0 
N/A 

58,2 

0,0 

30,5 

61,2 

For 2017, the average total issuance value per issuer per year on a sample of European SME-
dedicated exchanges was above EUR 61 million. The average per market varied significantly, 
ranging from EUR 12 million on the Greek SME-dedicated bond market to EUR 157 million 
on the French and Belgian SME-dedicated bond market.  

It should be noted that data were unfortunately not provided for the Italian mini-bond market 
ExtraMOT-Pro.  However,  data  from  the  Italian  banking  Insurance  and  Finance  Federation 
highlighted that since 2012, 83% of all issuances on ExtraMOT Pro had a value below EUR 
50 million261.  

261  FeBAF/VOEB  Event,  "New  Financial  Instruments:  the  Experience  of  Schuldscheindarlehen  in  Germany  and  the 
Comparison with Mini-Bonds in Italy", June 2017 

101 

 
 
 
 
 
 
 
                                                 
ANNEX 13: MARKET DATA COLLECTED FROM EUROPEAN MTFS 

For  the  purpose  of  the  Impact  Assessment,  Commission  services  sent  requests  for  data 
directly  to  most  securities  exchanges.  The  data  collected  and  compiled  cover  the  level  of 
activity and characteristics of the different SME-dedicated MTFs in the EU, when relevant in 
comparison to activity on European main regulated markets. 

1. General data on SME equity markets 

1.1. Total number of listed companies 

2006 

2007 

2008 

2009 

2010 

2011 

2012 

2013 

2014 

2015 

2016 

2017 

Dritter Markt 

Euronext G 

Start 

First North 

DBAG/Scale 

EN.A 

ESM 

AIM IT 

NewConnect 

AeRO 

BSSE 

MAB MARF 

AktieTorget 

NGM 

AIM UK 

TOTAL 

N/A 

73 

N/A 

81 

0 

1 

118 

N/A 

126 

0 

N/A 

N/A 

23 

0 

n/a 

N/A 

N/A 

0 

N/A 

12 

30 

0 

24 

N/A 

N/A 

0 

65 

28 

1 

127 

N/A 

132 

0 

9 

27 

0 

84 

N/A 

79 

0 

88 

26 

1 

125 

N/A 

129 

0 

12 

25 

5 

107 

N/A 

75 

2 

114 

21 

4 

155 

N/A 

124 

0 

14 

23 

11 

185 

N/A 

86 

12 

127 

18 

3 

181 

N/A 

133 

0 

14 

25 

14 

351 

N/A 

77 

17 

137 

19 

4 

4 

4 

5 

3 

4 

178 

184 

191 

200 

197 

196 

0 

125 

178 

14 

23 

18 

0 

135 

189 

14 

25 

36 

0 

172 

168 

14 

26 

57 

429 

445 

431 

1 

79 

22 

132 

17 

3 

71 

25 

123 

14 

5 

71 

29 

127 

15 

0 

213 

158 

14 

27 

74 

418 

280 

65 

45 

136 

19 

1 

258 

138 

14 

25 

77 

406 

277 

62 

67 

154 

34 

982 

1 

323 

48 

12 

22 

95 

408 

301 

53 

88 

163 

55 

960 

1,634 

1,694 

1,550 

1,293 

1,195 

1,143 

1,096 

1,087 

1,104 

1,044 

1,823 

2,086 

2,123 

1,909 

1,954 

2,114 

2,316 

2,355 

2,414 

2,698 

2,695 

2,729 

1.2. Total capitalisation of listed companies (EUR million) 

Dritter Markt 

2006 

N/A 

2007 

2008 

2009 

2010 

2011 

2012 

2013 

31 

51 

32 

189 

183 

721 

864 

2014 

1,630 

2015 

1,549 

2016 

163 

2017 

180 

Euronext G 

3,324 

5,621 

3,173 

4,105 

4,938 

5,428 

6,040 

8,229 

8,409 

13,350 

13,054 

12,754 

Start 

N/A 

N/A 

N/A 

N/A 

N/A 

N/A 

0 

0 

0 

0 

11 

22 

First North 

4,654 

4,214 

1,557 

2,414 

2,917 

2,568 

3,215 

3,994 

5,406 

9,658 

13,202 

16,040 

DBAG/Scale 

0 

0 

EN.A 

ESM 

AIM IT 

NewConnect 

AeRO 

BSSE 

MAB MARF 

N/A 

N/A 

2,400 

3,000 

0 

n/a 

N/A 

N/A 

0 

0 

329 

N/A 

N/A 

0 

0 

227 

964 

0 

345 

N/A 

N/A 

0 

AktieTorget 

N/A 

N/A 

N/A 

NGM 

0 

0 

0 

0 

0 

0 

0 

0 

35,480 

27,486 

29,413 

7,032 

229 

187 

165 

140 

143 

142 

118 

105 

101 

1,600 

2,000 

2,400 

3,200 

4,700 

5,600 

5,000 

4,400 

5,000 

474 

622 

N/A 

N/A 

129 

N/A 

0 

357 

349 

475 

1,183 

2,052 

2,925 

2,873 

5,579 

1,297 

1,922 

2,721 

2,657 

2,115 

2,042 

2,215 

2,306 

N/A 

N/A 

257 

N/A 

0 

N/A 

N/A 

382 

N/A 

0 

0 

N/A 

518 

N/A 

0 

41 

N/A 

41 

N/A 

851 

N/A 

934 

N/A 

1,334 

N/A 

1,802 

1,365 

2,670 

4,898 

9,081 

48 

0 

58 

0 

75 

0 

102 

0 

153 

0 

102 

 
 
 
 
 
 
 
 
AIM UK 

TOTAL 

133,280 

140,488 

46,033 

63,428 

92,921 

72,167 

75,950 

89,596 

89,268 

100,846 

96,977 

120,777 

143,658 

153,682 

52,349 

73,031 

105,062 

85,563 

92,980 

113,256 

151,565 

166,571 

168,347 

180,358 

1.3. Number of IPOs 

2006 

2007 

2008 

2009 

2010 

2011 

2012 

2013 

2014 

2015 

2016 

2017 

1.4. Total value of IPOs (EUR million) 

2006 

2007 

2008 

2009 

2010 

2011 

2012 

2013 

2014 

2015 

2016 

2017 

0 

46 

0 

12 

0 

4 

0 

37 

0 

33 

N/A 

N/A 

N/A 

N/A 

N/A 

Dritter Markt 

Euronext G 

Start 

First North 

DBAG/Scale 

EN.A 

ESM 

AIM IT 

NewConnect 

AeRO 

BSSE 

MAB MARF 

AktieTorget 

NGM 

AIM UK 

TOTAL 

N/A 

54 

N/A 

20 

0 

39 

0 

N/A 

N/A 

4 

0 

n/a 

N/A 

N/A 

0 

N/A 

0 

462 

540 

4 

0 

24 

N/A 

N/A 

0 

16 

4 

284 

417 

9 

0 

- 

0 

0 

61 

N/A 

0 

0 

17 

6 

114 

219 

- 

0 

- 

0 

4 

26 

N/A 

0 

2 

15 

0 

36 

87 

3 

0 

- 

0 

6 

86 

N/A 

0 

10 

23 

0 

102 

267 

Dritter Markt 

Euronext G 

Start 

First North 

DBAG/Scale 

EN.A 

ESM 

AIM IT 

NewConnect 

AeRO 

BSSE 

MAB MARF 

AktieTorget 

NGM 

AIM UK 

TOTAL 

N/A 

462 

N/A 

512 

0 

N/A 

907 

0 

n/a 

N/A 

N/A 

0 

N/A 

0 

0 

446 

N/A 

887 

0 

N/A 

183 

0 

43 

N/A 

N/A 

0 

16 

0 

0 

47 

N/A 

57 

0 

- 

0 

0 

46 

N/A 

0 

0 

12 

0 

14,617 

9,477 

1,352 

16,498 

11,052 

1,514 

1.5. Number of pure listings 

0 

10 

N/A 

- 

0 

- 

0 

32 

13 

0 

94 

N/A 

10 

0 

- 

0 

35 

60 

N/A 

N/A 

0 

47 

14 

0 

0 

17 

9 

0 

829 

910 

0 

12 

0 

3 

0 

- 

1 

3 

2 

0 

- 

1 

4 

172 

N/A 

89 

N/A 

0 

4 

6 

3 

0 

5 

8 

1 

90 

315 

73 

195 

0 

91 

N/A 

3 

0 

- 

167 

59 

165 

N/A 

0 

13 

3 

0 

0 

37 

0 

3 

0 

- 

124 

10 

55 

N/A 

0 

8 

9 

0 

0 

11 

0 

6 

0 

- 

3 

14 

42 

0 

19 

0 

32 

1 

- 

2 

21 

22 

0 

20 

0 

51 

0 

- 

2 

19 

19 

0 

12 

0 

42 

2 

- 

1 

11 

16 

0 

11 

0 

65 

4 

- 

1 

24 

19 

N/A 

N/A 

N/A 

N/A 

N/A 

0 

1 

10 

1 

99 

187 

0 

5 

26 

1 

118 

247 

0 

10 

28 

1 

61 

0 

7 

24 

12 

64 

0 

12 

27 

20 

80 

211 

191 

263 

0 

0 

0 

118 

100 

121 

0 

0 

0 

91 

0 

0 

55 

0 

0 

27 

0 

- 

959 

165 

25 

N/A 

0 

2 

8 

1 

545 

909 

626 

707 

2 

- 

283 

209 

11 

N/A 

0 

20 

34 

1 

0 

- 

372 

317 

18 

N/A 

0 

132 

39 

1 

26 

- 

102 

208 

11 

N/A 

0 

35 

104 

20 

67 

- 

270 

1,285 

37 

N/A 

0 

339 

139 

30 

1,405 

712 

876 

1,405 

3,255 

1,711 

1,324 

1,792 

1,665 

1,213 

1,122 

2,709 

4,460 

3,620 

2,547 

4,721 

103 

 
 
 
 
 
 
 
 
 
 
2006 

2007 

2008 

2009 

2010 

2011 

2012 

2013 

2014 

2015 

2016 

2017 

Dritter Markt 

Euronext G 

N/A 

0 

0 

1 

0 

2 

0 

0 

1 

2 

Start 

N/A 

N/A 

N/A 

N/A 

N/A 

First North 

DBAG/Scale 

EN.A 

ESM 

AIM IT 

NewConnect 

AeRO 

BSSE 

MAB MARF 

AktieTorget 

NGM 

AIM UK 

TOTAL 

25 

0 

16 

0 

N/A 

N/A 

3 

0 

n/a 

N/A 

N/A 

0 

N/A 

0 

184 

212 

5 

0 

5 

N/A 

N/A 

0 

10 

4 

102 

143 

8 

0 

- 

1 

0 

6 

N/A 

N/A 

0 

13 

6 

76 

112 

5 

0 

- 

2 

1 

4 

N/A 

N/A 

0 

4 

0 

23 

39 

6 

0 

- 

0 

0 

11 

N/A 

N/A 

0 

2 

0 

55 

77 

1.6. Share of domestic and foreign investors 

0 

0 

N/A 

16 

0 

- 

1 

0 

8 

N/A 

N/A 

1 

8 

3 

45 

82 

0 

0 

0 

6 

0 

- 

0 

2 

8 

1 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

1 

1 

0 

0 

12 

17 

10 

19 

14 

1 

- 

0 

5 

3 

2 

4 

- 

0 

1 

7 

2 

N/A 

N/A 

N/A 

0 

7 

1 

30 

55 

2 

8 

1 

35 

69 

1 

6 

1 

38 

77 

4 

- 

0 

2 

8 

276 

N/A 

7 

0 

4 

28 

339 

4 

- 

1 

2 

6 

3 

N/A 

16 

0 

11 

22 

85 

1 

- 

0 

1 

4 

30 

N/A 

10 

0 

3 

30 

94 

Euronext BE 

First 
North 

Euronext 
FR 

MTF 

Main 
market 

Domestic investors 

Foreign investors 

Domestic investors 

Foreign investors 

38% 

62% 

N/A 

N/A 

84% 

16% 

30% 

70% 

46% 

54% 

N/A 

N/A 

EN.A 

91% 

9% 

36% 

64% 

NewConn
ect 

Euronext 
PT 

MAB 

AIM UK 

93% 

7% 

48% 

52% 

60% 

40% 

N/A 

N/A 

89% 

11% 

57% 

43% 

57% 

43% 

44% 

56% 

1.7. Number of voluntary and mandatory delistings since 2006 

Dritter 
Markt 

Euro 
next 

First 
North 

DBAG 

EN.A 

ESM 

AIM 
IT 

NewCon
nect 

BSSE  MAB  

Aktie 
Torget  NGM 

2 

1 

30 

8 

93 

0 

90 

1 

1 

0 

20 

25 

11 

81 

88 

76 

0 

3 

1 

25 

127 

8 

9 

AIM 
UK 

128 

465 

Mandatory 
delisting 

Voluntary 
delisting 

1.8. Evolution of voluntary delistings since 2006 

Number of voluntary 
delisting 

2006 

2007 

2008 

2009 

2010 

2011 

2012 

2013 

2014 

2015 

2016 

3 

10 

17 

20 

60 

77 

85 

85 

140 

132 

108 

1.9. Transfers of listing between market segments since 2013 

Dritter 
Markt 

Euron
ext 

First 
North 

DBAG 

EN.A 

ESM 

AIM IT 

NewC
onnect 

BSSE 

MAB 

Aktie 
Torget 

NGM 

AIM 
UK 

Avg 
/year 

0 

43 

13 

21 

0 

1 

0 

0 

0 

0 

4 

5 

90 

15 

From RM 
to SME 
MTF 

104 

 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
From 
SME MTF 
to RM 

4 

34 

7 

3 

3 

44 

1 

5 

1 

19 

24 

1.10. Evolution of turnover ratio on EU SME MTFs 

2006 

2007 

2008 

2009 

2010 

2011 

2012 

2013 

2014 

2015 

Dritter Markt 

no data 

Euronext G BE 

0 

Start 

N/A 

First North 

113% 

Euronext G FR 

DBAG 

EN.A 

ESM 

AIM IT 

NewConnect 

Euronext G PT 

AeRO 

MAB MARF 

AIM UK 

0% 

N/A 

N/A 

0% 

n/a 

0 

N/A 

0 

77% 

5% 

0% 

N/A 

85% 

0% 

N/A 

N/A 

2% 

0% 

N/A 

60% 

0% 

N/A 

1% 

1% 

0% 

N/A 

58% 

0% 

N/A 

2% 

124% 

126% 

195% 

133% 

0% 

0% 

2% 

5% 

0% 

N/A 

56% 

0% 

N/A 

2% 

64% 

12% 

7% 

0% 

N/A 

56% 

0% 

N/A 

1% 

5% 

8% 

1% 

0% 

0% 

126% 

0% 

N/A 

1% 

4% 

9% 

43.6% 

35.5% 

42% 

61.6% 

39.9% 

19.8% 

0% 

N/A 

0% 

77% 

0% 

N/A 

0% 

62% 

0% 

N/A 

18% 

59% 

0% 

N/A 

10% 

60% 

0% 

N/A 

10% 

67% 

0% 

N/A 

10% 

78% 

1% 

0% 

0% 

84% 

0% 

N/A 

1% 

3% 

17% 

14% 

0% 

N/A 

15% 

58% 

1% 

0% 

0% 

82% 

0% 

N/A 

0% 

6% 

1% 

0% 

0% 

58% 

0% 

N/A 

0% 

8% 

0% 

N/A 

123% 

77% 

0% 

2% 

17% 

58% 

2016 

10% 

0% 

1% 

53% 

0% 

N/A 

2% 

6% 

0% 

5% 

5% 

2017 

5% 

0% 

1% 

60% 

0% 

N/A 

2% 

13% 

47% 

24% 

0% 

3% 

4% 

57% 

72% 

20% 

31% 

11% 

19.8% 

31.2% 

23.1% 

1.11. Evolution of turnover ratio on EU main markets 

2006 

2007 

2008 

2009 

2010 

2011 

2012 

2013 

2014 

2015 

2016 

2017 

Dritter Markt 

no data 

134% 

289% 

Start 

Progress Mkt 

N/A 

9% 

N/A 

6% 

N/A 

13% 

99% 

N/A 

5% 

84% 

N/A 

4% 

First North 

132% 

134% 

135% 

109% 

88% 

0% 

0% 

0% 

0% 

0% 

0% 

0% 

0% 

0% 

0% 

100% 

N/A 

4% 

89% 

0% 

0% 

49% 

N/A 

2% 

69% 

0% 

0% 

49% 

N/A 

3% 

64% 

0% 

0% 

13% 

20% 

63% 

36% 

23% 

42% 

40% 

66% 

DBAG 

EN.A 

ESM 

66% 

N/A 

2% 

64% 

0% 

25% 

59% 

73% 

N/A 

2% 

68% 

0% 

45% 

44% 

63% 

16% 

2% 

64% 

0% 

51% 

50% 

56% 

11% 

2% 

61% 

0% 

48% 

27% 

AIM IT 

154% 

204% 

185% 

158% 

163% 

179% 

138% 

128% 

153% 

153% 

114% 

108% 

NewConnect 

23.5% 

22.4% 

44.2% 

58.4% 

45.3% 

42.2% 

40.6% 

41.8% 

35.7% 

36.1% 

37.8% 

37.6% 

AeRO 

15% 

17% 

12% 

MAB MARF 

114% 

135% 

183% 

AIM UK 

N/A 

N/A 

N/A 

15% 

90% 

N/A 

13% 

22% 

119% 

117% 

N/A 

N/A 

15% 

93% 

N/A 

17% 

87% 

N/A 

17% 

11% 

108% 

134% 

N/A 

N/A 

11% 

98% 

N/A 

14% 

88% 

N/A 

1.12. Deviation from the minimum tick size regime 

Dritte
r 
Markt 

No 

No 

Euron
ext G  

First 
North 

DBAG 
FSE 

EN.A 

ESM 

AIM IT 

No 

No 

No 

No 

No 

No 

No 

No 

No 

No 

no 

no 

NewC
onnec
t 

0.01 

0.01 

AeRO 

BSSE 

MAB  

Aktie 
Torget 

NGM 

No 

No 

N/A 

0.01 

NO 

NO 

No 

N/A 

No 

No 

AIM 
UK 

No 

No 

MTF 

Main market 

1.13. Number of dual listings of companies listed on EU MTFs 

105 

 
 
  
  
  
 
 
 
 
 
 
 
 
 
 
 
Dritter 
Markt 

Euro
next 
G BE 

Start 

First 
North 

Euro
next 
G FR 

DBAG 
FSE 

EN.A 

ESM 

AIM 
IT 

NewCon
nect 

Euro 
next 
G PT 

AeRO 

BSSE  MAB  

Aktie 
Torget 

NGM 

AIM 
UK 

1 

1 

1 

3 

1 

1 

0 

20 

0 

0 

0 

N/A 

0 

0 

1 

1 

N/A 

1.14. Free float requirement and actual level 

Dritter 
Markt 

Requirement 
on MTF 

No 

Euro 
next 
G BE 

EUR 
2,5 
m 

Progress 
Mkt 

Start 

First 
North 

10% 

No 

10% 

Euro 
Next G 
FR 

EUR 
2,5 
million 

DBAG 
FSE 

20% 
or 1 
mio. 
pcs. 

EN.A 

ESM 

AIM 
IT 

New 
Con 
nect 

AeRO 

BSSE  MAB 

AIM 
UK 

10% 

No 

10% 

15% 

10% 

No 

EUR2m 

No 

Free float on 
MTF 

Free float on 
RM 

N/A 

55% 

N/A 

15% 

87% 

50% 

44% 

18% 

73.18% 

33% 

25% 

N/A 

N/A 

46% 

48% 

N/A 

65% 

24% 

35% 

60% 

67% 

61% 

47% 

68.28% 

45% 

49% 

36% 

N/A 

58% 

68% 

2. General data on SME bond markets 

2.1. Number of new bond issuers per year 

2013 

2014 

2015 

2016 

Euronext G 

First North 

DBAG/Scale 

EN.A 

AIM IT 

NewConnect 

AeRO 

MAB MARF 

TOTAL 

10 

14 

25 

0 

N/A 

N/A 

N/A 

1 

50 

9 

10 

9 

0 

N/A 

N/A 

N/A 

10 

38 

2.2. Outstanding number of issuers per year 

10 

15 

5 

0 

N/A 

N/A 

1 

10 

41 

11 

25 

6 

1 

N/A 

17 

3 

8 

71 

2017 

9 

17 

2 

1 

N/A 

18 

3 

12 

62 

2013 

2014 

2015 

2016 

2017 

Euronext G 

First North 

DBAG/Scale 

EN.A 

AIM IT 

NewConnect 

AeRO 

MAB MARF 

Stuttgart B 

TOTAL 

36 

12 

0 

0 

N/A 

N/A 

N/A 

1 

23 

72 

43 

20 

0 

0 

N/A 

N/A 

N/A 

11 

15 

89 

51 

24 

0 

0 

N/A 

N/A 

1 

21 

10 

107 

56 

30 

0 

1 

N/A 

129 

4 

29 

6 

255 

61 

37 

11 

1 

N/A 

122 

7 

41 

5 

285 

2.3. Number of bond issuances during the year 

106 

 
 
 
 
 
  
 
 
 
 
 
 
2013 

2014 

Euronext G 

First North 

DBAG/Scale 

EN.A 

AIM IT 

NewConnect 

AeRO 

MAB MARF 

TOTAL 

17 

17 

25 

0 

N/A 

N/A 

N/A 

1 

60 

14 

18 

9 

0 

N/A 

N/A 

N/A 

35 

76 

2.4. Outstanding number of bond issuances 

2015 

16 

100 

5 

0 

N/A 

N/A 

1 

51 

173 

2016 

2017 

17 

95 

7 

1 

N/A 

116 

3 

237 

476 

11 

74 

2 

1 

N/A 

162 

3 

318 

571 

2013 

2014 

2015 

2016 

2017 

Euronext G 

First North 

DBAG/Scale 

EN.A 

AIM IT 

NewConnect 

AeRO 

MAB MARF 

TOTAL 

46 

15 

0 

0 

N/A 

N/A 

N/A 

1 

62 

58 

23 

0 

0 

N/A 

N/A 

0 

24 

105 

69 

26 

0 

0 

N/A 

N/A 

0 

43 

138 

82 

37 

0 

1 

N/A 

309 

0 

63 

492 

2.5. Nominal value of new bond issuances during the year (EUR million) 

Euronext G 

First North 

DBAG/Scale 

EN.A 

AIM IT 

NewConnect 

AeRO 

MAB MARF 

TOTAL 

2013 

616 

54 

746 

0 

N/A 

nda 

N/A 

50 

2014 

446 

261 

338 

0 

N/A 

nda 

N/A 

489 

2015 

906 

198 

194 

0 

N/A 

nda 

1 

831 

1 467 

1 533 

2 130 

2.6. Average issuance value per the year (EUR million) 

Euronext G BE 

First North 

Euronext G FR 

DBAG/Scale 

2013 

60 

13.5 

23 

0 

2014 

29 

15.3 

37 

0 

2015 

55 

2 

62 

0 

107 

2016 

1 988 

437 

201 

4 

N/A 

1 947 

3 

2 280 

6 860 

2016 

73 

4.9 

443 

0 

88 

267 

15 

2 

298 

346 

0 

101 

1117 

2017 

1 199 

194 

100 

6 

N/A 

3 325 

2 

3 932 

8 758 

2017 

59.5 

2.7 

604 

0 

 
 
 
 
 
 
 
 
 
 
 
 
 
EN.A 

AIM IT 

NewConnect 

AeRO 

MAB MARF 

TOTAL 

0 

N/A 

nda 

N/A 

50 

24.4 

0 

N/A 

nda 

N/A 

14 

20.2 

0 

N/A 

nda 

0.9 

16.3 

12.3 

2.7. Outstanding nominal value of bond issuances (EUR million) 

Euronext G 

First North 

DBAG 

EN.A 

AIM IT 

NewConnect 

AeRO 

MAB MARF 

Stuttgart Börse 

TOTAL 

2013 
975.7 

220.7 

0.0 

0.0 

N/A 

N/A 

N/A 

50 

1,700 

2,946.5 

2014 
1,416.7 

502.3 

0.0 

0.0 

N/A 

N/A 

N/A 

500.0 

1,100 

3,518.9 

2015 
2,274.3 

544.4 

0.0 

0.0 

N/A 

N/A 

0.9 

1,029 

750 

4,598.7 

4 

N/A 

16.7 

0.8 

9.6 

14.4 

2016 
4,221.4 

806.5 

0.0 

4.0 

N/A 

6,500 

3.4 

1,608 

540 

6 

N/A 

29.1 

0.7 

12.3 

89.3 

2017 
5,240.7 

617.5 

707.0 

10.0 

N/A 

8,970 

5.6 

2,195 

510 

13,683.6 

18,255.4 

2.8. Annual volume of transactions on EU SME MTFs (EUR million) 

Euronext G 

First North 

AIM IT 

NewConnect 

AeRO 

MAB MARF 

TOTAL 

2013 

16 

3 

0 

2 

N/A 

0 

21 

2014 

25 

1 

0 

3 

N/A 

0 

29 

2015 

19 

50 

0 

2 

4.3 

0 

72 

2016 

14 

569 

0 

2 

7.5 

0 

586 

 2.9. Annual volume of transactions on EU regulated markets (EUR million) 

Euronext G 

Progress Mkt 

First North 

DBAG 

EN.A 

AIM IT 

NewConnect 

AeRO 

MAB MARF 

TOTAL 

2013 

53 

0 

2014 

81 

0 

2015 

60 

0 

2016 

43 

0 

10811654 

7668240 

7422150 

5998351 

7101432 

0 

0 

0 

4 

1396 

1 

0 

0 

0 

4 

956 

1 

0 

0 

0 

4 

2843 

1 

0 

0 

0 

5 

1345 

0 

0 

0 

0 

6 

1569 

0 

10813108 

7669281 

7425058 

5999744 

7103084 

108 

2017 

26 

808 

0 

2 

7 

0 

835 

2017 

77 

0 

 
 
 
 
 
 
 
 
 
 
 
3. Various requirements on SME-dedicated MTFs 

Dritter  
Markt 

Euro 
next 

Progress  
Mkt 

First  
North 

DBAG 

EN.A 

ESM 

AIM 
IT 

New 
Connect 

AeRO 

BSSE 

MAB 
MARF 

Aktie 
Torget 

NGM 

AIM 
UK 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

N/A  

Yes 

 No 

Yes 

Yes 

no 

Yes 

yes  

Yes 

Yes 

Yes 

Yes 

YES 

Yes 

Yes 

No 

Yes 

quarterly 
reports  

Yes 

Yes 

N/A 

No 

yes  

Yes 

Yes 

Yes 

N/A 

n/a 

Yes 

Yes 

N/A 

No 

N/A 

N/A 

N/A 

Key  
advisers 

Half-yearly 
reports on 
equity mkt 
Half-yearly 
reports on 
bond mkt 

4. MTFs wishing to register or not as an SME Growth Market 

Dritter 
Markt 

Euro 
next 

Progress 
Mkt 

First 
North 

DBAG 

EN.A 

Xtend 

ESM 

AIM IT 

New 
Con 
nect 

AeRO 

BSSE 

MAB 
MARF 

Aktie 
Torget 

NGM 

AIM 
UK 

For 
SME 
equity 
market 

For 
SME 
bond 
market 

No 

Yes 

Yes 

Yes 

Yes 

N/A 

No 

Yes 

No 

Yes 

Not 
decided 
yet 

Not 
decided 
yet 

Yes 

No 

Already 
registered 

Yes 

No 

No 

Yes 

No 

No 

Already 
registered 

N/A 

N/A 

Not 
decided 
yet 
(EXTRA-
MOT 
PRO)  

Yes 

No 

No 

Not 
decided 
yet 

N/A 

No 

N/A 

109 

 
 
 
 
 
 
 
 
 
 
 
ANNEX 14: THE CURRENT REGULATORY ENVIRONMENT OF 'SME GROWTH MARKETS' 

MiFID II provides for a new category of MTFs, the SME Growth Markets. Registration as an 
SME Growth Markets will be voluntary and will be available as of January 2018. The recitals 
of MiFID II indicate that attention should be focused on how future regulation should further 
foster and promote the use of that market so as to make it attractive for investors, and provide 
a  lessening  of  administrative  burdens  and  further  incentives  for  SMEs  to  access  capital 
markets through SME growth markets. Therefore, beyond MiFID II, several EU Acts refer to 
this new type of trading venues.  

1. MiFID II 

According to MiFID II, a SME Growth Markets is a MTF, where at least 50% of the issuers 
whose  financial  instruments  are  traded  on  are  SMEs.  SMEs  are  defined  as  companies  that 
have  an  average  market  capitalisation  of  less  than  EUR  200  million.  An  Issuer  that  only 
issues non-equity instruments can also be considered as SMEs if, according to its last annual 
or  consolidated  accounts,  they  meet  at  least  two  of  the  following  three  criteria:  an  average 
number  of  employees  during  the  financial  year  of  less  than  250,  a  total  balance  sheet  not 
exceeding EUR 43 million and an annual net turnover not exceeding EUR 50 million.   

The  level  2  of  MiFID  grants  SME  Growth  Markets  flexibility  in  evaluating  the 
appropriateness  of  issuers  for  admissions  on  their  venue.  For  instance,  an  SME  Growth 
Markets  only  needs  to  determine  in  their  rulebook  a  regime  of  objective  admission  criteria 
(including a statement on the sufficiency of working capital) for issuers seeking the listing of 
their shares. When a prospectus is not needed, the admission document is drawn up under the 
responsibility  of  the  issuer  and  clearly  states  whether  or  not  it  has  been  approved  and 
reviewed and by whom.  

The  SME  Growth  Markets  shall  also  impose  on  issuers  admitted  on  their  venue  ongoing 
financial  disclosure  obligations.  They  shall  require  the  issuers  to  publish  annual  financial 
reports within 6 months after the end of each financial year and half yearly financial reports 
within 4 months after the end of the first 6 months of each financial year. 

2. Market Abuse Regulation   

The  Market  Abuse  Regulation  (MAR)  is  applicable  to  MTFs,  including  the  SME  Growth 
Markets. However, this regulation includes two specific alleviations for SMEs whose shares 
are  admitted  to  trading  on  SME  Growth  Markets.  First,  it  exempts  issuers  from  producing 
insider  lists  on  an  ongoing  basis.  MAR  also  intends  to  limit  the  burden  for  SME  growth 
market  issuers  by  allowing  the  posting  of  inside  information  on  the  SME  growth  market 
trading venue instead of the issuers’ own websites. 

3. Prospectus Regulation 

The  prospectus  Regulation  has  created  an  alleviated  'EU  Growth  Prospectus'.  This  'EU 
Growth  prospectus'  will  be  available  for  the  following  entities  provided  they  have  no 

110 

 
 
 
securities admitted to trading on a regulated market: (i) SMEs262; (ii) non-SMEs traded on an 
SME  growth  market  with  a  market  capitalisation  of  less  than  EUR  500,000,000;  and  (iii) 
issuers of securities with a public offer of less than EUR 20,000,000 whose securities are not 
traded on an MTF and with up to 499 employees.  

In  addition,  issuers  that  have  had  securities  already  admitted  to  trading  on  an  SME  growth 
market  (or  a  regulated  market)  continuously  for  at  least  the  last  18  months  will  be  able  to 
benefit from a short form disclosure regime for secondary issuances. 

4. Central Securities Depositories Regulation  

The  Central  Securities  Depositary  Regulation  ('CSDR')  was  adopted  in  July  2014.  CSDR 
imposes  a  mandatory  buy-in  process  on  any  financial  instrument  which  has  not  been 
delivered within a set period from the intended settlement date (i.e. two days after trading, so 
called 'T+2' rule). This buy-in process is triggered after a period whose length is dependent 
on  the  asset  type  and  liquidity  of  the  relevant  financial  instruments  i.e.  up  to  four  days  for 
liquid securities, seven days for illiquid securities and up to 15 days for transactions on SME 
growth  markets.  The  transitional  provisions  provide  that  multilateral  trading  facilities  that 
fulfil  the  requirements  for  being  qualified  as  SME  Growth  markets  can  benefit  from  this 
specific rule (i) until – upon their application – they are registered as such in accordance with 
conditions  of  MiFID  II  or  (ii)  until  13  June  2018,  if  they  decide  not  to  apply  for  such 
registration. 

5. The Review of the European Venture Capital Fund (EuVECA) Regulation  

The  revised  EuVECA  regulation  (approved  by  the  European  Parliament  on  14  September 
2017 and by the Council on 9 October 2017) will allow investment in SMEs listed on a SME 
growth market as defined by MiFID II, to allow growth stage entities that have already access 
to  other  sources  of  financing  to  also  receive  capital  from  EuVECA  funds.  This  means  that 
SMEs,  listed  on  SME  Growth  Markets,  with  an  average  market  capitalisation  of  less  than 
EUR 200 million on the basis of end-year quotes for the previous three calendar years will be 
eligible  for  investments  by  EuVECA  funds.  The  revised  Regulation  also  permits  follow-on 
investments  in  a  given  undertaking  which  after  the  first  investment  does  not  meet  the 
definition of the qualifying portfolio undertaking any more. 

6. Other texts that apply to MTFs including to SME Growth Markets 

The  recently  created  European  Long-Term  Investment  Funds  (ELTIFs)  shall  invest  at  least 
70% of their money in certain types of assets, such as companies listed on regulated market 
or MTFs and with a  market capitalisation below EUR 500 million. The amendments to  the 
Solvency  II  Delegated  Act  that  came  into  force  in  March  2016  grants  ELTIF  shares  and 
equities traded on MTFs (including the future SME Growth Markets) the same capital charge 
as equities traded on regulated markets. 

262 Under  the  Prospectus  Regulation,  SMEs  are  (i)  either  defined  as  entities  meeting  at  least  two  of  the  following  three 
criteria: an average number of employees during the financial year of less than 250, a total balance sheet not exceeding EUR 
43 million and an annual net turnover not exceeding EUR 50 million, or (ii) defined in accordance with MiFID (ie average 
market capitalisation of less than EUR 200 million). 

111 

 
 
 
 
                                                 
 
ANNEX  15:  EU  ACTS  AND  ALLEVIATIONS  GRANTED  TO  SME  GROWTH  MARKETS 
ISSUERS 

EU Act 

Current 
alleviations/benefits 
foreseen by EU law 

Who can benefit from those 
alleviations/benefits? 

Would  a  threshold  raised  to 
EUR  500  million  extend 
those alleviations/benefits?  

MAR 

Alleviation 
insider lists 

in 

terms  of 

  All SME GM issuers 

Prospectus 

Alleviated EU Growth 
Prospectus 

  SMEs as defined by MiFID II 

(i.e. market cap  

  Non-SME issuers listed on an 
SME GM with a market cap 
up to EUR 500 million 

Prospectus  Alleviated  prospectus  for 

  All SME GM issuers listed for 

secondary issuances 

at least 18 months 

EuVECA 

Investments  by  EuVECA 
funds in SMEs 

  SME 

listed  on  an  SME 

Growth Market issuers  

ELTIFs 

Investments  by  ELTIFs  in 
SMEs 

  MTFs  or  regulated  market 
issuers with a market cap up to 
EUR 500 million 

No. All the SME GM 
irrespective of their size can 
benefit from MAR alleviations 

No. The EU Growth 
Prospectus is already available 
for all SME GM issuers with a 
market cap up to EUR 500 
million 

No. All the SME GM 
irrespective of their size can 
benefit from MAR alleviations 

Yes. A raised threshold would 
allow EuVECA funds to invest 
into SMEs with a market cap 
up to EUR 500 million.  

No. SME GM issuers are by 
definition MTF issuers. A 
change in the threshold would 
not change their situation. 

112 

 
 
 
 
 
 
 
 
 
 
 
 
 
ANNEX 16: ASSESSMENT OF POLICY OPTIONS - SYNTHESIS TABLE 

Policy Options 

Legal basis 

Impact on 
issuers 

Impact on 
investors 

Impact on 
exchanges 

Impact on 
intermed. 

Impact 
on NCAs 

Evidence  

Political 
feasibility 

Opinion 

1 – Create strong and attractive SME Growth Markets 

1.1 Definition of debt-only issuers on SME GM 
1.2 Liquidity contracts 
1.3 Transfer Prospectus 
1.4 Free-float criterion 
1.5  Definition of SME Growth Markets for equity 

1.6 Transfer of listings from regulated market to SME GM 

1.7 Delisting rules 

1.8 Key advisers for first-time equity issuers 
1.9 Tick size regime 
1.10 Credit rating 

MiFID II level 2 
MAR level 1 
PR level 1 
MiFID II level 2 
MiFID II level 1 
MiFID II level 1  
& other 
MiFID II level 1  
& other 
MiFID II level 1 
MiFID II level 1 
CRAR level 1 

++ 
++ 
++ 
≈ or - 
+ 

+ 

+ 

≈ or - 
? 
≈ or + 

≈ 
++ 
≈ or - 
+ 
+ 

+ 

+ 

++ 
? 
≈ or + 

++ 
+ 
≈ 
≈ 
≈ 

- 

- 

- 
? 
≈ 

≈ 
+ 
≈ 
+ 
≈ 

≈ 

≈ 

≈ 
? 
- 

2 – Alleviate the administrative burden for issuers on SME Growth Markets 

2.1 Half-yearly reports for debt-only issuers 
2.2  Exemption  from  market  sounding  regime  for  private 
placements of bonds 
2.3 List of insiders 
2.4  Justification  to  delay  the  public  disclosure  of  inside 
information 
2.5  Extended  deadline  for  notification  of  managers’ 
transactions 
2.6 Public disclosure of managers’ transactions by the NCA 
2.7 Threshold for notification of managers’ transactions 
2.8 Disclosure of inside information by debt-only issuers 

MiFID II level 2 

MAR level 1 

MAR level 1 

MAR level 1 

MAR  
level 1 

MAR level 1 

+ 

+ 

++ 

++ 

+ 

++ 
+ 
+ 

≈ or - 

+ 

≈ 

≈ 

≈ 

≈ 
≈ or + 
- 

Favourable opinion 
Not recommended – due to limited evidence, political sensitivity, and/or market integrity risks 

+ 

≈ 

≈ 

≈ 

≈ 

≈ 
≈ 
≈ 

≈ 

+ 

≈ 

≈ 

≈ 

≈ 
≈ 
≈ 

≈ 
- 
≈ 
≈ 
≈ 

≈ 

≈ 

≈ 
? 
- - 

≈ 

≈ 

- 

- 

≈ 

- - 
≈ or - 
- - 

*** 
*** 
*** 
** 
** 

** 

** 

** 
* 
* 

** 

*** 

*** 

*** 

** 

** 
* 
* 

++ 
+ 
+ 
+ 
- - 

- - 

- - 

- - 
- - 
- - 

++ 

+ 

+ 

+ 

+ 

- 
- 
- - 

113 

 
 
  
  
  
  
 
 
 
 
 
 
 
  
  
  
 
 
 
 
 
 
ANNEX  17:  EXPLANATORY  GRAPH  ON  THE  EXTENSION  OF  THE  TIME-PERIOD  TO 
DISCLOSE MANAGERS’ TRANSACTIONS  

Date 
transaction 

of 

Current situation 

MAX 3 DAYS 

PDMR/PCA notifies the issuer 

Issuer discloses  
to the public 

If the PDMR/PCA takes 
too long to notify the 
issuer, the latter can 
have difficulty disclosing 
to the public within the 
3-day limit 

Proposed change under option 2 

Date 
transaction 

of 

3 DAYS 

PDMR/PCA notifies the issuer 

Date of 
notification  
to the issuer 

Issuer discloses  
to the public 

MAX 3 DAYS 

MAX 2 DAYS 

114