Britain to launch review into attracting more stock market listings

6:54 pm Wednesday, March 08th, 2023

By Huw Jones

LONDON (Reuters) – Britain’s finance ministry said on Wednesday it will launch a review into how investor research on companies could be improved to attract more listings, a step that follows a decision by UK chip designer Arm Ltd to only list in New York.

The Investment Research Review will be launched next Monday and chaired by Rachel Kent, a veteran financial services lawyer at Hogan Lovells, who will report back to City minister Andrew Griffith within three months, the ministry said.

“It seeks to develop concrete steps the government can take to enhance London’s status as Europe’s leading listings destination, and only second globally,” the ministry said.

Griffith will give more details in a speech to the FIX trading conference in London on Thursday.

Investors use research from analysts at banks and brokers for picking stocks, but concerns have been raised about the quality and quantity of research produced in Britain, particularly for tech and life sciences, the ministry said.

There is a worry this could dampen valuations and the attractiveness of London as a place to raise capital. Firms often list on Nasdaq or ICE in New York given higher valuations for tech firms there.

“Research matters – and the right depth and breadth of investment research is vital to ensure markets operate well and companies obtain the valuations they deserve,” Griffith said in the ministry statement.

The review will look at whether rules inherited from the European Union which “unbundle” research, meaning its cost is separately itemised from other activities like executing stock trades to end conflicts of interest, has had any impact on the amount of UK investment research or the breadth of coverage.

An EU review found that unbundling had no significant impact on the number of analysts.

Earlier on Wednesday, Britain’s Financial Conduct Authority said multiple factors were at play to influence Arm’s decision.

The review is part of the “Edinburgh Reforms”, which trailed the research review as part of a package to reform financial rules to exploit Britain’s freedom to write its own regulations now that is has left the European Union.

(Reporting by Huw Jones;Editing by Elaine Hardcastle)