Market participants are keen to bring more companies under the small and medium enterprise (SME) umbrella, stating that the current €200 million cap is outdated.
In its report to the European Commission, the European Securities and Markets Authority’s (ESMA) has issued a series of recommendations to support the goals of the Listing Act.
Introduced in November 2024, the listing act was designed with the intention of improving public capital market access to European companies and encouraging companies to IPO – and remain – on European markets.
READ MORE: Listing act not enough to keep IPOs in Europe, AFME says
Following a series of consultation papers on Level 2 measures for the act, ESMA has issued recommendations around MiFID II, the Market Abuse Regulation (MAR) and the Prospectus Regulation. The Commission has until July 2026 to adopt these recommendations.
SME GMs
ESMA reviewed the requirements for multilateral trading facilities (MTFs) and segments to register as small and medium enterprise growth markets (SME GMs). This category, introduced in Article 33 of MiFID II, aims to make it easier for SMEs to access capital markets and for specialist markets catering to these SMEs to develop further.
Further clarifying how an MTF can operate an SME GM, ESMA emphasised the need for high levels of investor protection and confidence, and minimal administrative burdens for issuers.
Some responses from industry bodies noted that the determining SME threshold of €200 million under MiFID II is too low, and should be raised to include mid-cap firms. Participants stated that this could increase market attractiveness and liquidity. ESMA has recommended that the European Commission take this into consideration.
In its response, Deutsche Borse commented: “The underlying definition of an SME within MiFID II (and other regulations) should be unified and increased regarding the market capitalisation. We support raising the threshold for companies qualifying from an average market capitalisation of €200 million to €500 million.”
Euronext proposed a greater increase, to €1 billion.
Article 78(2)(e) of CDR 2017/565 requires issuers to state whether their working capital is sufficient for present requirements. ESMA proposed that this requirement be aligned with the prospectus regulation and growth issuance prospects, specifying that working capital is applicable only for share issuances.
This was a more contentious issue for respondents, some of whom believe that this would increase administrative and monetary costs with limited benefits and could misrepresent an issuer’s overall financial health.
MAR
On MAR, requests were made by market participants for further clarification of what ‘inside information’ means, how the delay mechanism can be activated under the new structure, and the protocol for rumours or leaks occurring before the final event or circumstance. Participants also called for flexibility in the regime, with each case considered separately.
ESMA has recommended that protracted processes are more clearly defined as “a series of several actions or steps spread in time which need to be performed, in order to achieve a pre-defined objective or result”. The category is further down into three categories with this definition, identifying the relevant time for disclosure: (i) protracted processes that are entirely internal to the issuer, (ii) processes that involve the issuer and external counterparties and (iii) protracted processes that involve the issuer and public authorities.
ESMA has clarified that inside information related to intermediate steps in a protracted process is not subject to delayed disclosure requirements during disclosure.
Responding to the proposals, Nasdaq Nordics called for simplified and clarified guidance across member states when it comes to disclosing inside information in a protracted process.
“Although the establishment of the “decision to sign off the agreement” as the moment when disclosure is expected is a positive step in forming a common understanding of MAR, Nasdaq Nordic suggests ESMA to consider the signing of an agreement as the key moment instead. The “decision to sign off” could be subject to different interpretations in different member states,” it stated.
“[This is] a much more concrete event in a protracted process, where a legally binding agreement comes into existence for all parties, and thus not as open to different interpretations.”
By contrast, Deutsche Borse suggested that stakeholders inform the market earlier – when the authority decides to begin proceedings. Opting for the time of decision to sign off on the agreement as the point of disclosure is too late, it argued.
“It does not make much sense to define the receipt by the issuer of the final decision of the authority as the final event if that final event will never be the relevant point in time of disclosure in practice. Also, for some allegations even the initiation of proceedings would represent a price-sensitive event.”
“DBG thinks that ESMA’s assumption that the management board decision already provides for a sufficient degree of certainty regarding the outcome of the process disregards the crucial role of the supervisory board as an independent body in two-tier systems. If the supervisory board approval is mandatory under statutory law, such approval requirement should be considered. We would therefore ask ESMA to please reconsider its current position.”
The group also stated that clarification is needed to determine whether elements of protracted processes depend, at least partly, on the issuer or not. Currently, it said, the scenarios this model applies to is uncertain.
