Listing is the procedure for adding securities to the exchange list that is traded on the exchange. It provides control over the compliance of the company's securities with the conditions and rules established on the exchange. According to another definition, a listing is the very list of securities that are traded on the exchange.
Listing objectives
Companies go through the listing procedure, because this gives the issuer a number of advantages. The main goal of the companies is to obtain a cheap way to gain access to borrowed funds, as well as to offer securities to a wide range of Russian and foreign investors.
The listing procedure makes the company's shares and bonds more liquid, it increases the attractiveness of the securities in the eyes of investors. This is their advantage over securities traded in the over-the-counter sector.
The admission of securities to exchange trading indicates that a business has reached a higher level and increases the company's prestige in the eyes of investors, helps to improve its image. Listing is a kind of brand advertisement. Passage of the listing procedure serves as an indicator that speaks about the reliability and financial stability of the company. It becomes easier for them to get loans from banks.
From the point of view of the exchange itself, the listing of securities is carried out in order to create optimal conditions for trading, raises the awareness of investors about the securities market, identifies reliable issuers, protects the interests of investors, and creates unified rules for access to trading.
The reverse of the listing procedure is delisting. This procedure is carried out in case of bankruptcy of the company, suspension of its activities, violation of the listing rules by the company.
Listing procedure
In order for the company's shares or bonds to be admitted to trading on the stock exchange, a number of requirements are imposed on them. These include the size of capitalization, the number of securities, the amount of proceeds, net profit, the minimum balance of trade, etc. The issuing company must comply with the principles of openness and transparency of business.
Listing rules are individual for each exchange. They are based on the current legislation in the field of securities. For example, on the MICEX, the listing procedure consists of the following stages. Initially, a statement on the passage of the securities listing procedure. It is accompanied by documents that confirm the company's compliance with the established requirements. Within 10 days, the exchange examines the documents and, if the decision is positive, an agreement for the examination is concluded. After an examination, which can take 45 days, a listing agreement is concluded with the issuing company.
When listing securities on the London Stock Exchange, the prospectus must be registered with the UK Listing Authority. Also, the company will be required to provide financial statements for the last 3 years according to IFRS standards. At the time of listing, at least 1/4 of the total volume of securities must be in free circulation in Europe. On other exchanges, the listing procedure is generally similar.
