On May 24, 2018, the European Commission (“EC“) published:

• A draft Regulation to amend the Market Abuse Regulation (Regulation 596/2014) (“MAR“) and the Prospectus Regulation ((EU) 2017/1129) in respect of promotion of the use of small and medium-sized enterprise (“SME“) growth markets.
• A draft Delegated Regulation amending Delegated Regulation (EU) 2017/565 (the Commission Delegated Regulation) as regards certain registration conditions to promote the use of SME growth markets.

The MiFID II Directive (2014/65/EU) created a new type of trading venue, the SME growth market, as a sub-group of multilateral trading facilities (“MTFs“), to facilitate access to capital for SMEs and the further development of specialist markets to cater for the needs of SME issuers. However, the current definition of SMEs is not suitable for companies issuing bonds. In addition, SME growth market debt-only issuers have to produce a semi-annual financial report. This is a more stringent requirement than the one applying to issuers of bonds to professional investors on regulated markets.

Addressing these specific issues, the Commission’s proposals include measures that will make it easier for trading venues specialised in bond issuance to register as SME growth markets. This will be done by formulating a new definition of debt-only issuers; being those that issue less than EUR 50 million of bonds over a 12-month period.

The proposals also give more flexibility for SME growth market operators on whether or not to impose the obligation to produce semi-annual reports on SME debt-only issuers.

Other proposals include an exemption for privately-placed bonds from the ‘market sounding regime’ (subject to conditions). Market sounding is where information is given prior to the announcement of a transaction to gauge the interest of potential investors.