The Federation of European Securities Exchanges (FESE) has organised a seminar with CFA Institute on 21st February 2013 in Brussels, focusing on the actions needed to improve the EU capital markets’ ability to finance long‐term economic growth. FESE’s partnership with CFA Institute in this joint seminar underscores the common ideal shared by stock exchanges and investors, which is fair, safe, and liquid markets that enable growth. The seminar is aimed at contributing to the EU discussion being launched by the European Commission’s upcoming Green Paper on long‐term investment and specifically focuses on investments in smaller companies. In recognition of the increasing constraints on bank lending available to SMEs, participants discussed how Europe can help SMEs get better access to both private and public equity and public bonds for SMEs.
Giving the keynote speech at the joint seminar today, EU Internal Market Commissioner Michel Barnier reiterated his call to restore long‐term investment in companies of all sizes through a broad and dynamic review of banking, financial markets and the use of public funds‐ an objective fully supported by FESE member exchanges. Close to 90% of all companies listed on FESE member exchanges are medium and small‐sized enterprises.i FESE members provide a full range of services and products to meet the needs of these companies and to attract new IPOs. Listing on public markets contributes to the EU economy by producing employment, by allowing the citizens and taxpayers to share the benefits of innovation and entrepreneurship, and by ensuring that savers can fully assess and trust the companies they are investing in. Over the last two years, FESE and its members have been working with the European Commission closely to improve SME access to public markets.
Against this background, FESE members make three principal recommendations.
- First, it is necessary to take a fresh look at all legislation that can impact SME listings. The EU has been effective at integrating its national markets and increasing competition, but less good at meeting the needs of its smaller companies. FESE President Hans‐Ole Jochumsen stated, ‘Markets must serve everyone. Europe cannot afford to have a market of champions that leaves some players behind. We should continue to integrate, but develop a clear vision of where this integration will take us. Therefore, I encourage Commissioner Barnier to be bold in his forthcoming Green Paper. LI welcome in particular his promise of an open‐minded review. Let’s ensure that our fundamental legislative philosophy helps all companies to grow.’
- Second, exchanges believe that the EU should remove tax disincentives faced by investors when investing in equity in general and in SMEs in particular. Such scrutiny should cover not only existing taxation but also potential new taxes such as the Financial Transactions Tax, which could have unintended consequences that can cost jobs. Of particular concern is the risk that this tax might end up becoming a tax on listed markets, which would go against the objectives of growth and sustainability. FESE President stated, ‘Too often, EU regulation only targets companies listed on exchange. This ultimately undermines the sustainability of markets.’
- Third, FESE welcomes the newly emerging debate on how public funds could be helped to encourage investment in listed SMEs. FESE President stated, ‘EU funds have been used to help loans to SMEs and to help private equity in SMEs, but recently many people are discovering that investment in listed SMEs may also need initial public support to draw in the private funds needed by the economy. FESE welcomes the discussion on how best this can be implemented.’
