Review of ISDX Growth Market Rules – Implications for eligibility assessment of market participants.

ISDX (ICAP Securities & Derivatives Exchange Limited) has announced that it is conducting a comprehensive review of the entry requirements and Rulebook for the ISDX Growth Market (previously known as the PLUS Market). The current ISDX Growth Market Rulebook was adopted on 9 July 2013, following the market’s acquisition by ICAP. ISDX say that the review is being carried out to ensure an appropriate balance between achieving its regulatory objectives, whilst still making the market attractive.

ISDX welcomes contributions from stakeholders to the review of the rules and entry requirements, which can be provided to Patrick Birley, CEO of ISDX, at patrick.birley@icap.com or to the ISDX team at ISDX@icap.com

The review will be followed by a public consultation on any future rule changes.

ISDX have also stated the review will impact on the implementation of Guidance Notes 4.7 and 5.2 of the ISDX Growth Market rules. These provide that companies already admitted to the ISDX Growth Market on 9 July 2013 (the date the Rulebook was adopted) will undergo an assessment from 9 January 2015 (eighteen months after the adoption of the Rulebook) to see whether they comply with the entry requirements for new applicants to the market provided by Rules 4 and 5. This is a one-off assessment and not a continuing obligation.

Rule 4 provides five tests for an applicant company (other than an investment vehicle) which apply to: the proportion of its shares in public hands (as a percentage of issued share capital), revenue, EBITDA, historic revenue records and gross assets (including cash). To meet the Rule 4 requirements, an already admitted company subject to assessment must demonstrate to the satisfaction of ISDX, based on its most recent audited financial information, that it achieves a cumulative minimum total of twenty points under the tests. Under Rule 5, an investment vehicle is required to raise a minimum of £500,000 (or the currency equivalent) by the subscription of shares at the time of admission. If an investment vehicle didn’t raise that amount on admission, it will need to have raised £500,000 net of expenses subsequently.

Companies not meeting the requirements under the assessment would have to leave the market.

ISDX has confirmed that, although the assessment of companies’ compliance with Rules 4 and 5 would proceed as planned, non-compliant companies will not be withdrawn from trading while the review of the Rulebook and entry requirements is in progress, or until further notice. The results of the assessment will be taken into account during the review.

The review and consultation looks as if it will be continuing well into next year, and companies on the market should not assume that there will be any relaxation of the requirements of Guidance Notes 4.7 and 5.2.

Edwin Coe’s corporate group has significant experience in advising on ISDX markets’ regulation and legal issues arising from an application for admission to a market and the continuing obligations. If you would like any further information about this, please contact Nick Williams by emailing nick.williams@edwincoe.com.

If you aren’t receiving our legal updates directly to your mailbox, please sign up now