Implications on competition and investors’ protection

On this delicate theme, authoritative doctrine has expressed its view by underlying that the possibility conceded to a trading venue to unilaterally admit to trading instruments of an issuers who has not given its consent may have relevant consequences and effects both on the competition between regulated markets and different trading venues and on investors protection.

Firstly Ferrarini argued how this chance could possibly help the formation and the development of the aforementioned Pan European markets¹⁸⁴. In this way, for example, Vit-x may have introduced on its circuit not only blue-chips coming from Switzerland, but also other nationalities’ similar instruments. The author made reference to the Belgian legislation that, already in 1999¹⁸⁵, implemented the opportunity to trade on a secondary regulated market of that country (whit a total or partial exempt from the obligation to publish the prospectus) instruments already admitted to trading in a foreign but regulated, legally recognized and open market.

This system may boost and enhance the internationalization and the growth of European level, by granting a minimum level of compactification between different Member States. However, he was not sure on how these experiments could end. In any

184 FERRARINI,G.(2002), p. 596.

185 See article 1 Arrête Royal of 6 July 1999 which modified article 10 Arrête Royal of 31 October 1991.

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case, he argued that the main effects would have been suffered by the competition between different trading venues¹⁸⁶.

Starting from the earlier stages of the European Union and of the capital markets regulation, the aim of the community was to implement a mutual recognition of listing and trading particulars that could create an adequate (or at least minimum) level of harmonization between different Member States in terms of admission rules. Here, the focus has gone further. The concept of unilateral recognition started to gain relevance¹⁸⁷. It is basically what the article 51 lays down: the regulators allow the admission to trading on the basis of the fact that they find the foreign regime under which the issuer has fulfilled its duties as sufficiently equivalent to their national regime and thus unilaterally recognize it. By doing this, smaller trading venues could have access to “superstar” stocks, without having to negotiate a proper mutual recognition agreement, using this chance a sort of “weapon”¹⁸⁸ against bigger market regulator.

Ferrarini goes on by relating to this concept and saying that potentially every national market may have the chance to become international by unilaterally admitting instruments of foreign markets¹⁸⁹. By contrast, the author argues that many regulatory problems may arise from this situation. However, he also adds that, by explicitly saying that those instruments are only admitted to trading on that specific market and are listed in another foreign market (whose rules are the ones with which they comply), investors are not exposed to any specific or particular risk. In particular, he strongly reiterates the necessity to understand how, in a globalized financial world (and this is valid nowadays more then ever), investors have an easy common access to every regulated market. Therefore, admitting to trading instruments whose issuers are subject only to foreign legislation does not involve any particular risk or “solicitation”

to investment for investors of that specific country which may have the chance to purchase the same instruments on the foreign one¹⁹⁰.

186 FERRARINI,G.(2002), p. 596

187 LICHT,A. N. (2001) Stock Exchange Mobility, Unilateral Recognition, and the Privatization of Securities Regulation, p. 588-589.

188 Ibid., p. 598.

189 FERRARINI,G.(2002), p. 597.

190 Ibid., p. 597.

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Given this scenario, as it has been already underlined, the difference between admission to listing and admission to trading may be portrayed as if the former always requires a request by the issuer, while the latter may be disposed even without such request. It is pretty clear that the admission to listing may be sought for a number of various reasons as it brings with it a number of valid advantages¹⁹¹. On the other side, assuming the status of listed company involves a series of burdens, requirements and costs. It means that the issuer whose intention is to go public must comply with a set of conditions, not only in the moment in which the admission is requested but also for the entire period in which its instruments remain listed and are traded in the relevant market. The company must respect certain thresholds in order to be listed. Moreover, once its admission has been disposed, it must continue to comply with provisions concerning different aspects of a legal person’s day-by-day life: e.g., internal organisation, corporate governance, information flows, disclosure requirements and financial reports, depending also on each national legislation.

Therefore, it is necessary that the request comes from the issuer itself. It cannot be bound to a series of obligations coming from a status that it didn’t decide to have. This is why many European jurisdictions (e.g., Italy) require that a relevant body of the issuer (usually the shareholders’ meeting) has given its authorization to the request to go public.

By contrast, the admission to trading can be disposed unilaterally. Of course, it is necessary to take into account all the relevant instances at stake, especially those of the issuer. In particular, the instruments must be already traded, and the issuer informed of the “new” admission. From the depicted scenario it can be assumed that the choice of the issuer has already been expressed once it has decided to go public¹⁹². This means that the company has accepted all the consequences that from the first admission to trading derive. The issuer has voluntarily decided to be subject to the provisions concerning the listed companies in a way that, the simple admission to trading on a different market, would not have any “negative” or heavy outcome on its internal organization regime.

191 See chapter 1.

192DE LUCA,N.(2009), p. 27.

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The distinction, as understood in its last and third significance, is mirrored in the chance that a European issuer may be not only admitted to dual (or multiple) listing but also to dual (or multiple) trading. The dual listing, as defined in the previous chapter, is disposed whenever the issuer decides to be listed not only in the market and under the rules of its incorporation state, but also in another state. On the other side, a company’s financial instruments may be defined as dual traded whenever, even without the consent of the issuer, they are exchanged and transferred in negotiations carried out not only in the country in which the issuer has decided to be listed (or primary traded) but also in a different country. As a consequence, the issuer will be recognized and ruled only by the regulatory requirements of the state thereof, as they are the only ones which he has decided to depend on. However, it should be noted that when the admission to trading is requested by the issuer and not by the trading venue this distinction is more blurred. Maybe a regulatory intervention by the European legislation could have been adequate.

To properly conclude the discussion on this theme, it may be useful to investigate also whether the distinction as understood above may be deemed to be relevant or not in the Italian legislation.