EU Market Abuse Regulation and its implications

The Channel Islands Securities Exchange (CISE) has experienced an increased interest in listing specialist securities, particularly high yield bonds, since the introduction of a new European Union (EU) market abuse regime on 3 July 2016, effected as a result of the new EU Market Abuse Regulation (MAR).

The introduction of MAR has had a number of implications for issuers of debt securities who usually list on EU exchanges.  Of these, the disclosure requirements, including the need to compile and maintain insider lists are seen as the most burdensome for issuers.  While issuers of debt securities listed on the regulated markets of EU Member States were already subject to existing EU market abuse regulation, MAR will extend beyond those regulated markets to other organised trading facilities and multilateral trading facilities.  The extension means that issuers of debt securities on unregulated markets across the EU will now be subject to MAR. 

This has led to increased interest in a listing on the CISE by both new issuers and issuers with existing high yield bonds already listed.  Historically, Ireland and Luxembourg have been the markets of choice for high yield bonds but the Channel Islands may now be a more attractive market for issuers.

MAR has no impact on securities listed on the CISE

MAR has direct effect in all EU member states.  The Channel Islands are not part of the EU and therefore MAR does not apply to debt securities listed on the CISE.  Notwithstanding this, the Channel Islands Securities Exchange Authority (CISEA) has committed to continue to apply global standards of regulation proportionate to the nature of its business while remaining competitive.  It has reviewed and amended its Listing Rules and Model Code For Securities Transactions by Persons Discharging Managerial Support.  The important point to note is that because of the nature of specialist securities and the participants in their issue, ownership and trading, issuers with specialist securities listed under Chapter 8 (which includes debt securities) of the Listing Rules have no obligation to implement the Model Code and therefore are not subject to the changes to the Model Code that have been made as a result of MAR.  The pragmatic and competitive approach of the CISEA has ensured the ongoing and increased attractiveness of listing on its exchange.

Advantages of the CISE

Other advantages of the CISE include:

  • headquarted in Guernsey and with an office in Jersey, the CISE is located in close proximity and with good links to the UK.  The Channel Islands  also operate in the UK time zone;
  • securities listed on the CISE may also be exempt under the quoted eurobond exemption from the requirement to pay UK withholding tax;
  • the CISEA adopts a pragmatic and commercial approach to disclosure, which focuses on issues material to an investor, without the lengthy disclosure which may be required for other stock exchanges operating under the EU Prospectus Directive;
  • the CISEA has a responsive approach and listing applications can typically be completed in four to six weeks from start to finish;
  • initial and annual fees are extremely competitive compared to other similar exchanges and more reasonable compared to larger exchanges;
  • the CISEA operates under global standards of regulation in a manner proportionate to the business being carried out so that there is investor protection but issuers are not unduly burdened;
  • the CISEA does not insist on the appointment of a local paying agent and many listings are achieved without any paying agent being appointed; and
  • the CISEA is flexible in its accounting requirements and will not require the adoption of international accounting standards or international financial reporting standards, provided that an accounting standard acceptable to the Exchange is used.

Bedell Channel Islands Limited (BCIL)

BCIL is a Category 1, 2 and 3 listing member of the CISEA enabling it to act as a sponsor on all categories of listings.  BCIL has a dedicated listing team and has experience of acting as sponsor and/or adviser to a significant number of specialist debt securities.

Bedell Cristin was appointed by The Channel Islands Securities Exchange Limited to act as key adviser in connection with its listing on its own exchange. The transaction saw Bedell Cristin provide legal advice in both Guernsey and Jersey and BCIL also acted as listing sponsor.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.