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SME growth market
European Union Electricity Market Glossary

 

 

 

'SME growth market' is a concept introduced by the MiFID II Directive and means a MTF that is registered as an SME growth market in accordance with Article 35 of the said Directive.

 

The MiFID II wording indicates, by definition an SME Growth Market will be an MTF, hence these markets will constitute a subset of the MTFs in the EU.

 

In accordance with Article 3(1)(11) of MAR in conjunction with Article 4(1)(12) of MiFID II a "SME growth market" means a MTF that is registered as an SME growth market in accordance with Article 33 of MiFID II.

 

One of the conditions of Article 33 of MiFID II is that at least 50% of the issuers whose financial instruments are admitted to trading on the MTF are SMEs at the time when the MTF is registered as an SME growth market.

 

Furthermore, Article 4(1)(13) of MIFID II states that (for the purposes of that Directive) SMEs means companies that had an average market capitalisation of less than EUR 200.000.000 on the basis of end-year quotes for the previous three calendar years.

 

Europe Economics, Data Gathering and Cost Analysis on Draft Technical Standards Relating to the Market Abuse Regulation, 6 February 2015, p. 13, 14 observes "there are no SME Growth Markets per se and hence no definitive listing of them", however, using the MiFID database as a starting point, it identifies about 40 potential SME Growth Markets among the existing MTFs in the EU.

 

Assuming as a key test in identifying SME Growth Markets the median market capitalisation less than €200 million for each of the last three years, the above analysis estimates the number of issuers on SME Growth Markets at a level of 2,500.

 

When it comes to to more granular data, it was also assessed five countries have no candidate SME Growth Markets, with a further 14 having a sole SME Growth Market (collectively, Germany and the United Kingdom account for eight and five of the SME Growth Markets, respectively).

 

 

 

Article 4(1)(12) of MiFID II

 

'SME growth market' means a MTF that is registered as an SME growth market in accordance with Article 33

 

 

 

 

Article 4(1)(13) of MiFID II

 

'small and medium-sized enterprises' for the purposes of this Directive, means companies that had an average market capitalisation of less than EUR 200 000 000 on the basis of end-year quotes for the previous three calendar years

 

 

 

 

Article 33 of MiFID II

SME growth markets

 

1. Member States shall provide that the operator of a MTF may apply to its home competent authority to have the MTF registered as an SME growth market.

 

2. Member States shall provide that the home competent authority may register the MTF as an SME growth market if the competent authority receives an application referred to in paragraph 1 and is satisfied that the requirements in paragraph 3 are complied with in relation to the MTF.

 

3. Member States shall ensure that MTFs are subject to effective rules, systems and procedures which ensure that the following is complied with:

(a) at least 50 % of the issuers whose financial instruments are admitted to trading on the MTF are SMEs at the time when the MTF is registered as an SME growth market and in any calendar year thereafter;

(b) appropriate criteria are set for initial and ongoing admission to trading of financial instruments of issuers on the market;

(c) on initial admission to trading of financial instruments on the market there is sufficient information published to enable investors to make an informed judgment about whether or not to invest in the financial instruments, either an appropriate admission document or a prospectus if the requirements laid down in Directive 2003/71/EC are applicable in respect of a public offer being made in conjunction with the initial admission to trading of the financial instrument on the MTF;

(d) there is appropriate ongoing periodic financial reporting by or on behalf of an issuer on the market, for example audited annual reports;

(e) issuers on the market as defined in point (21) of Article 3(1) of Regulation (EU) No 596/2014, persons discharging managerial responsibilities as defined in point (25) of Article 3(1) of Regulation (EU) No 596/2014 and persons closely associated with them as defined in point (26) of Article 3(1) of Regulation (EU) No 596/2014 comply with relevant requirements applicable to them under Regulation (EU) No 596/2014;

(f) regulatory information concerning the issuers on the market is stored and disseminated to the public;

(g) there are effective systems and controls aiming to prevent and detect market abuse on that market as required under the Regulation (EU) No 596/2014.

 

4. The criteria in paragraph 3 are without prejudice to compliance by the investment firm or market operator operating the MTF with other obligations under this Directive relevant to the operation of MTFs. They also do not prevent the investment firm or market operator operating the MTF from imposing additional requirements to those specified in that paragraph.

 

5. Member States shall provide that the home competent authority may deregister a MTF as an SME growth market in any of the following cases:

(a) the investment firm or market operator operating the market applies for its deregistration;

(b) the requirements in paragraph 3 are no longer complied with in relation to the MTF.

 

6. Members States shall require that if a home competent authority registers or deregisters an MTF as an SME growth market under this Article it shall as soon as possible notify ESMA of that registration or deregistration. ESMA shall publish on its website a list of SME growth markets and shall keep that list up to date.

 

7. Member States shall require that where a financial instrument of an issuer is admitted to trading on one SME growth market, the financial instrument may also be traded on another SME growth market only where the issuer has been informed and has not objected. In such a case however, the issuer shall not be subject to any obligation relating to corporate governance or initial, ongoing or ad hoc disclosure with regard to the latter SME growth market.

 

8. The Commission shall be empowered to adopt delegated acts in accordance with Article 89 further specifying the requirements laid down in paragraph 3 of this Article. The measures shall take into account the need for the requirements to maintain high levels of investor protection to promote investor confidence in those markets while minimising the administrative burdens for issuers on the market and that de-registrations do not occur nor shall registrations be refused as a result of a merely temporary failure to meet the conditions set out in point (a) of paragraph 3 of this Article.

 

 

 

 

Article 3(1)(11) of the Market Abuse Regulation (MAR)

 

'SME growth market' means SME growth market as defined in point (12) of Article 4(1) of Directive 2014/65/EU

 

 

 

 

Commission Delegated Regulation (EU) of 25.4.2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive

 

SECTION 9

SME GROWTH MARKETS

 

Article 77
Qualification as an SME
(Article 4(1)(13) of Directive 2014/65/EU)

 

1. An issuer whose shares have been admitted to trading for less than three years shall be deemed an SME for the purpose of point (a) of Article 33(3) of Directive 2014/65/EU where its market capitalisation is below EUR 200 million based on any of the following:

(a) the closing share price of the first day of trading, if its shares have been admitted to trading for less than one year;
(b) the last closing share price of the first year of trading, if its financial instruments have been admitted to trading for more than one year but less than two years;
(c) the average of the last closing share prices of each of the first two years of trading, if its financial instruments have been admitted to trading for more than two years but less than three years.

 

2. An issuer which has no equity instrument traded on any trading venue shall be deemed an SME for the purpose of Article 4(1)(13) of Directive 2014/65/EU if, according to its last annual or consolidated accounts, it meets 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 43 000 000 and an annual net turnover not exceeding EUR 50 000 000.

 

Article 78
Registration as an SME growth market
(Article 33(3) of Directive 2014/65/EU)

 

1. When determining whether at least 50% of the issuers admitted to trading on an MTF are SMEs for the purposes of registration as an SME growth market in accordance with point (a) of Article 33(3) of Directive 2014/65/EU, the competent authority of the home Member State of the operator of an MTF shall calculate the average ratio of SMEs over the total number of issuers whose financial instruments are admitted to trading on that market. The average ratio shall be calculated on 31 December of the previous calendar year as the average of the twelve end-of-month ratios of that calendar year.

Without prejudice to the other conditions for registration specified in points (b) to (g) of Article 33(3) of Directive 2014/65/EU, the competent authority shall register as an SME growth market an applicant with no previous operating history and, after three calendar years have elapsed, shall verify that it complies with the minimum proportion of SMEs, as determined in accordance with the first subparagraph.

 

2. With regard to the criteria laid out in points (b), (c), (d) and (f) of Article 33(3) of Directive 2014/65/EU, the competent authority of the home Member State of the operator of an MTF shall not register the MTF as an SME growth market unless it is satisfied that the MTF:

(a) has established and applies rules providing for objective and transparent criteria for the initial and ongoing admission to trading of issuers on its venue;

(b) has an operating model which is appropriate for the performance of its functions and ensures the maintenance of fair and orderly trading in the financial instruments admitted to trading on its venue;

(c) has established and applies rules that require an issuer seeking admission of its financial instruments to trading on the MTF, to publish, in cases where Directive 2003/71/EC does not apply, an appropriate admission document, drawn up under the responsibility of the issuer and clearly stating whether or not it has been approved or reviewed and by whom;

(d) has established and applies rules that define the minimum content of the admission document referred to under point (c), in such a way that sufficient information is provided to investors to enable them to make an informed assessment of the financial position and prospects of the issuer, and the rights attaching to its securities;

(e) requires the issuer to state, in the admission document referred to under point (c), whether or not, in its opinion, its working capital is sufficient for its present requirements or, if not, how it proposes to provide the additional working capital needed;

(f) has made arrangements for the admission document referred to under point (c) to be subject to an appropriate review of its completeness, consistency and comprehensibility;

(g) requires the issuers whose securities are traded on its venue to publish annual financial reports within 6 months after the end of each financial year, half yearly financial reports within 4 months after the end of the first 6 months of each financial year;

(h) ensures dissemination to the public of prospectuses drawn up in accordance with Directive 2003/71/EC, admission documents referred to under point (c), financial reports referred to under point (g) and information defined in Article 7(1) of Regulation (EU) No 596/2014 publicly disclosed by the issuers whose securities are traded on its venue, by publishing them on its website, or providing thereon a direct link to the page of the website of the issuers where such documents, reports and information are published;

(i) ensures that the regulatory information referred to under point (h) and direct links remain available on its website for a period of at least five years.

 

Article 79
Deregistration as an SME growth market
(Article 33(3) of Directive 2014/65/EU)

 

1. With regard to the proportion of SMEs, and without prejudice to the other conditions specified in points (b) to (g) of Article 33(3) of Directive 2014/65/EU and in Article 78(2) of this Regulation, an SME growth market shall only be deregistered by the competent authority of its home Member State where the proportion of SMEs, as determined in accordance with the first subparagraph of Article 78(1) of this Regulation, falls below 50% for three consecutive calendar years.

 

2. With regard to the conditions specified in points (b) to (g) of Article 33(3) of Directive 2014/65/EU and in Article 78(2) of this Regulation, the operator of an SME growth market shall be deregistered by the competent authority of its home Member State where such conditions are no longer satisfied.

 

Recitals 111 - 115

 

(111) When assessing whether a market fulfils the requirement laid down in point (a) of Article 33(3) of Directive 2014/65/EU that at least 50% of the issuers admitted to trading on that market are small and medium-size enterprises (SMEs), a flexible approach should be taken by competent authorities with regard to markets with no previous operating history, newly created SMEs whose financial instruments have been admitted to trading for less than three years and issuers exclusively of non-equity financial instruments.


(112) Given the diversity in operating models of existing MTFs with a focus on SMEs in the Union, and to ensure the success of the new category of SME growth market, it is appropriate to grant SME growth markets an appropriate degree of flexibility in evaluating the appropriateness of issuers for admission on their venue. 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.


(113) With regard to the content of the admission document which an issuer is required to produce upon initial admission to trading of its securities on an SME growth market, where the requirement to publish a prospectus pursuant to Directive 2003/71/EC does not apply, it is appropriate that competent authorities retain discretion to assess whether the rules set out by the operator of the SME growth market achieve the proper information of investors. While full responsibility for the information featured in the admission document should lie with the issuer, it should be for the operator of an SME growth market to define how the admission document should be appropriately reviewed. This should not necessarily involve a formal approval by the competent authority or the operator.


(114) The publication by issuers of annual and half-yearly financial reports represents an appropriate minimum standard of transparency which is coherent with the prevailing best practice in existing markets focusing on SMEs. As to the content of financial reports, the operator of an SME growth market should be free to prescribe the use of International Financial Reporting Standards or financial reporting standards permitted by local laws and regulations, or both, by issuers whose financial instruments are traded on its venue. Deadlines for publishing financial reports should be less onerous than those prescribed by Directive 2004/109/EC as less stringent timeframes appear better suited to the needs and circumstances of SMEs.


(115) Since the rules on dissemination of information about issuers on regulated markets under Directive 2004/109/EC would be too burdensome for issuers on SME growth markets, it is appropriate that the website of the operator of the SME growth market becomes the point of convergence for investors seeking information on the issuers traded on that venue. A publication on the website of the operator of the SME growth market can also be effected by providing a direct link to the website of the issuer in case the information is published there, if the link goes directly to the relevant part of the website of the issuer where the regulatory information can be easily found by investors.

 

 

 

 

 

Questions and Answers on MiFID II and MiFIR market structures topics, 4 October 2018, ESMA70-872942901-38

 

Question 8 [Last update: 04/10/2018]

 

Can a market operator or an investment firm operating an MTF apply for a single segment of the MTF to be registered as an SME growth market?

 

Answer 8

 

The operator of an MTF can apply for a segment of the MTF to be registered as an SME growth market when the requirements and criteria set out in Article 33 of MiFID II and Articles 77 and 78 of the Commission Delegated Regulation 2017/565 are met in respect of that segment. A specific segment registered as an SME growth market should be considered in isolation to other segments within the MTF. Other segments which are not specifically registered as an SME GM, cannot benefit from the SME growth market regime. For this purpose the following conditions should apply:

 

- An SME growth market segment is clearly separated from the other market segments operated by the MTF operator. Clear separation implies at least a different name, rulebook, marketing strategy, and publicity as well as the allocation of the dedicated “Segment MIC” to the SME GM segment.


- Trades made on a specific SME growth market segment should be clearly distinguished from other market activity within the other segments of the MTF.

 

Furthermore, on demand of the competent authority and with the aim of avoiding circumvention of the definition of an SME growth market, the MTF should provide a comprehensive list of the instruments listed on an SME growth market segment and provide any further requested information on the operation of the SME growth market segment.

 

 

 

 

 

 

 

IMG 0744

    Documentation    






 

 

Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that DirectiveArticles 77 - 79, Recitals 111 - 115

 

Commission Delegated Regulation (EU) of 25.4.2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive, 25.4.2016 C(2016) 2398 final

 

Questions and Answers on MiFID II and MiFIR market structures topics, 31 January 2017, ESMA70-872942901-38

 

 

 

 

 

 

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    Links    

 

 

 

 

 

 

Attachment

 

 

Extract: Commission Staff Working Document Impact Assessment Accompanying the document Commission Delegated Regulation supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council with regard to definitions, transparency, portfolio compression and supervisory measures on product intervention and positions {C(2016) 2860 final} {SWD(2016) 156 final}, 18.5.2016, SWD(2016) 157 final, Annex 7, 8, p. 108-123

 

 

Attachments:
FileDescriptionFile sizeLast Modified
Download this file (Proposals for further harmonisation of SME Growth Markets.pdf)Harmonisation of SME Growth MarketsExtract: Commission Staff Working Document Impact Assessment {C(2016) 2860 final} {SWD(2016) 156 final}, 18.5.2016, SWD(2016) 157 final, Annex 7, 8, p. 108-123489 Kb03/09/16 13:19
Last Updated on Thursday, 08 November 2018 21:51
 

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