On 29 October 2019 Euronext announced that Euronext Growth, its pan-European multilateral trading facility (“MTF”) dedicated to small & mid-capitalized companies, has been officially registered as "SME Growth Market" for both shares and bonds by the competent authorities in Ireland, Belgium, France, and Portugal.

The designation follows similar designations of London’s NEX Exchange Growth Market and AIM, which bear many similarities to Euronext Growth, in being designated an SME Growth Market.

The status has been designed to facilitate access to capital markets for European SME’s by developing qualified markets to cater for the specific needs of SMEs. Designation as an SME Growth Market allows Euronext Growth issuers and applicants to benefit from reduced administrative requirements under the Prospectus Regulation and the Market Abuse Regulation, thus reducing the administrative burden placed on SMEs when listing or issuing equity and bonds with the aim to increase liquidity on SME Growth Markets.

What is an SME Growth Market?

MiFID II introduced a new category of MTFs, focused on SMEs and labelled accordingly 'SME Growth Markets'. Its aim is to safeguard investor protection and market integrity, while at the same time minimising the unnecessary administrative burden for potential issuers through a number of regulatory measures. Article 33 of MiFID II provides that the operator of a MTF may apply to its home competent authority to have the MTF registered as an SME Growth Market. A MTF that is registered as an SME Growth Market in accordance with Article 33 of MiFID II must satisfy several conditions, including that, at the time the MTF is registered as an SME Growth Market and in any calendar year thereafter, at least 50% of the issuers whose financial instruments are admitted to trading on the MTF are SMEs.

What is an SME?

For the purposes of Article 4(13) of MiFID II, an SME is a company that had an average market capitalisation of less than €200 million on the basis of end-year quotes for the previous three calendar years. If the company has a market capitalisation of less than €200 million but has been admitted to trading for less than three years, the following become relevant:

(a) If its shares have been admitted to trading less than one year - the closing share price on the first day of trading;

(b) If its shares have been admitted to trading for more than one year but less than two years - the last closing share price of the first day of trading; or

(c) If its shares have been admitted to trading for more than two years but less than three years - the average of the last closing share prices of each of the first two years of trading.

As of 11 October 2019, by virtue of Delegated Regulation (EU) 2019/1011, an issuer that has no equity instrument traded on any trading venue shall be deemed an SME for the purposes of Article 4(1)(13) of Directive 2014/65/EU if the nominal value of its debt issuances over the previous calendar year, on all trading venues across the Union, does not exceed EUR 50 million

Implications of Listing on SME Growth Markets

Companies listed on an SME Growth Market are required to produce less extensive prospectuses at both initial and subsequent admissions to exchanges. Issuers on SME Growth Markets will also benefit from a less extensive insider list disclosure regime. This should reduce the administrative burden and the high compliance costs faced by SME Growth Market issuers and foster the liquidity of publicly listed SME shares to make these markets more attractive for investors, issuers and intermediaries.