UK launches new listing rules in bid to boost London stock exchange

The U.K.’s Financial Conduct Authority announced Thursday new rules for the country’s stock market listings in a bid to boost growth following a slow down in IPOs.

The new rules — which come into effect from July 29 — will ensure the U.K.’s listing system is more in line with those in other markets, and will make it simpler and more streamlined, the FCA said in a statement.

The measures mark the biggest change to the listing regime in over three decades, the FCA said. “They aim to support a wider range of companies to issue their shares on a UK exchange, increasing opportunities for investors,” the regulator added.

One key change is the removal of the ‘premium’ and ‘standard’ listing segments. Instead there will be one overall category for equity share listings, which has been named ‘commercial companies.’

Premium listings previously had additional requirements compared to standard ones. Some of these will be carried over and now applied to all listings, while others have been scrapped.  

“The new rules remove the need for votes on significant or related party transactions and offer flexibility around enhanced voting rights. Shareholder approval for key events, like reverse takeovers and decisions to take the company’s shares off an exchange, is still required,” the FCA said.

Some rules around eligibility for listings will also change, such as the removal of a requirement for companies to provide track records of their revenue.

The rules are a positive move for the U.K. IPO market, but could have gone further, Chris Haynes, corporate partner at law firm Gibson Dunn told CNBC in emailed comments.

“The move to a single listing category with streamlined eligibility criteria, and to disclosure-based continuing obligations, is one of a number of important initiatives which, together, should lead to more UK IPO activity,” he said.

“In my view the FCA could have created further flexibility in some areas, such as in relation to dual class share structures, however overall it’s a good outcome,” Haynes added.

The new rules come at a time when the European listings market, and the U.K.’s in particular, have slumped. Major tech companies have recently favored the U.S. for their listings, including British chip designer Arm which chose to list on New York’s Nasdaq last year.

Euronext reported 64 equity listings on its platform last year, a significant drop from the 83 listings it welcomed in 2022.

The new rules were made in response to the 2021 U.K. Listing Review report which showed that the number of listed companies in the UK has declined by about 40% since 2008, and that only 5% of global IPOs between 2015 and 2020 took place in the U.K.