Stock market reforms aim to revitalize the City of London; US regional bank stocks hit again: live trading

key events

FCA CEO Nikhil Rathi adds that the regulator wants to stimulate debate about the UK’s appetite for financial risk, telling Today:

What we want to do with these proposals is stimulate that discussion and recognize that if we’re going to move to an environment where companies get into markets faster, grow faster, that comes with risk.

Risk will often mean significant gains for investors, but things will also go wrong. And that’s part of a healthy dynamic market.

FCA chief: reforms mean higher risks for shareholders

Today’s proposed changes to UK stock market listing rules will make it “easier for companies to join the market quickly”, insists the FCA director.

But Nikhil Rathi It is also clear that they will make the market riskier.

Speaking on Radio 4’s Hoy Program, Rathi says the FCA is proposing some “really important reforms” at a time when there is a “global phenomenon” of companies leaving public markets.

Rathi says:

What this is doing is striking a new balance between companies selling shares and investors.

It implies more risk for investors, since they have to know the companies better and make their own judgments about how they want to invest and at what price they want to invest.

Q: But won’t removing the premium section of the stock market hurt London’s reputation?

Rathi insists that London will “always uphold high standards” with regard to disclosure and regulation.

But in a world where companies are growing very fast, it makes sense to have a single listing scheme rather than offering two of which they have to choose to list in London, Rathi argues.

And it notes there will be “greater risk to shareholders” by allowing companies to rely more on disclosures than shareholder votes on important issues, such as deals.

Rathi Syas:

That means more shareholder engagement and more shareholder risk and I think that’s the trade-off that we’ve been pretty open about as we think about how these reforms will work.

Introduction: The regulator proposes sweeping changes to the UK listing regime

Good morning, and welcome to our ongoing coverage of business, financial markets, and the global economy.

New measures are being revealed today to encourage companies to list on the London stock exchange rather than abroad, but the changes would expose investors to greater risk.

The UK’s financial watchdog plans to change the City’s listing rules, hoping to stem the flow of companies to rival markets such as Wall Street.

The plans detailed today by the Financial Conduct Authority (FCA) aim to make London a more attractive site to list, removing some of the eligibility requirements that can deter start-ups and start-ups.

The FCA proposes several measures in a new consultation document, including:

  • simplifying the market, by merging the London standard and premium markets into a single category for equity shares, removing the gold standard “primary listing” category.

    This “single capital category” would include measures to tempt company founders to list in London, such as being more tolerant of dual class share structures with different voting power, such as so-called ‘Gold Shares’.

  • Abandon removing mandatory shareholder votes on transactions like acquisitions, so companies can move forward with deals and grow faster.

  • remove the requirement for companies to have three years of audited financial accounts, which would make it easier for companies to enter the market

He FCA says:

The proposed changes are intended to provide a simpler and more accessible UK listing regime for companies, improving the attractiveness of listing in the UK and providing a wider range of investment opportunities for investors.

But… switching to a listing regime based on disclosure and commitment, rather than regulatory rules, brings more risk to the system.

So he FCA He says he wants an open discussion about the change in risk appetite this would imply.

A recent review found that the number of publicly traded companies in the UK has fallen by around 40% from a recent peak in 2008, and that between 2015 and 2020, the UK accounted for just 5% of IPOs to date. world level.

My colleague Jasper Cheerful reports:

The Financial Conduct Authority (FCA) said on Tuesday night it plans to abolish the stricter “premium” class of listing on the London stock exchange and make it easier for company founders to maintain control of companies using American-style “gold stocks,” among others. a series of big changes to City regulations.

The changes are part of a push by the Conservative government to stem the decline of London’s stock market since the global financial crisis and attract new companies to list here. There were 2,101 companies listed on the main London market in 2003, but that number has fallen to 1,097 today, according to data from the London Stock Exchange. The average number of publicly traded companies fell from 177 a year before the 2008 financial crisis to 66 a year in the period since, according to data firm Dealogic.

Also out today

The US Federal Reserve is expected to raise US interest rates again tonight as it tries to bring inflation down to its 2% target.

The Fed’s FOMC committee is forecast to raise its benchmark policy rate by a quarter of one percent, to a new target range of 5-5.25 percent, the highest level since mid-2007.

The Fed meeting is overshadowed by jitters over US regional banks. Shares of midsize lenders fell again yesterday, despite President Joe Biden’s insistence that the banking system was “safe and sound” after the collapse of the First Republic.

JPMorgan Acquisition of Troubled California Lender First Republic deposits and most of its assets on Monday has not allayed concerns about the health of the sector.

To exchange westpacThe Los Angeles-based lender was briefly halted yesterday on volatility and closed down nearly 28%.

western alliance of Phoenix, Arizona, lost 15%.

US REGIONAL BANKS UNDER COSH yesterday – PacWest Bancorp -28%, Metropolitan Bank -20% and Western Alliance Bank -15%!

—David Buik (@truemagic68) May 3, 2023

ipek Özkardeskayasenior analyst at swissquote BankExplain:

Bank relief after JP Morgan swallowed First Republic Bank on Monday was short-lived, as some regional bank stocks including Valley National Bankcorp lost another 3%, Western Alliance Corporation another 15% and PacWest Bancorp another 28%. even though it had said last week that deposit outflows had slowed in March.

As such, the SPDR US regional bank ETF fell more than 6%.

It means that, no, the US regional banking crisis is difficult to dispel, high interest rates are really taking their toll and the latter is likely to have a considerable impact on credit lending and therefore on economic activity.

today’s market

The sharp falls came from small and midsize banks, which have come under intense scrutiny as the banking system shows cracks under the weight of much higher interest rates. PacWest Bancorp fell 27.8%, Western Alliance Bancorp fell 15.4% and Comerica sank 12.4%.

—PSC (@pscooput) May 3, 2023

The agenda

  • 9.30am BST: Office for National Statistics report: “How does the average price of items change over time?”

  • Noon BST: Weekly US Mortgage Applications Data

  • 7pm BST: Federal Reserve interest rate decision

  • 7:30pm BST: Federal Reserve press conference

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