Listing levels of securities

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Listing levels of securities

A developing company eventually comes to the need to issue its securities on the stock exchange. One of the stages is listing. Listing is providing access to buy/sell a company's securities on an exchange. The most logical reason is to raise funds for development, and there are many advantages that do not manifest themselves immediately:

a company's assets and liabilities are easier to assess, so they can be sold more quickly and easily;
attracting a wide range of investors;
corporate governance standards are being raised;
a company becomes more transparent by meeting listing requirements.
As the Exchange complements the range of securities available for trading, investors can choose from more assets. A full list of securities with listing levels is available on the Moscow Stock Exchange website.

Why several listing levels
Obviously, companies differ from each other in many ways. Their financial results, company size, industry and many more create different risks when investing. By dividing into levels, the exchange provides a private investor with primary information on whether the company meets the high requirements and whether it is risky to invest. This allows a reasonable approach to the choice of securities.

In order to be listed on the exchange, a company must provide documents depending on the type of securities and the level of listing. Preparation of the documents and bringing a company up to a certain level of listing requirements requires temporary investment and careful preparation. Listing levels of any securities on the Moscow Stock Exchange are divided into 3 categories. From III not so demanding to I, in which the set of securities of known emitters is traded. In fact, the differences in the levels are justified by the rules and conditions.

Listing of bonds
For companies, bonds are a way to raise funds an analogue of a bank loan. As with stocks, the level of listing depends on the Moscow Stock Exchange requirements for this procedure. The mandatory requirements for each bond are similar to those for shares, as everything is based on the same principles.

Tier III
As with the shares, the basis for the rest is level III requirements:

compliance with the requirements of the Russian legislation, including CB regulations;
registration of the securities prospectus (not required for level III);
disclosure of all required information.
Such securities allow to raise relatively small amounts of funds without significant requirements to the issuer. However, this does not indicate the size of the company. An example of this is Alfa-Bank, a large private bank. Level II
In addition to the requirements of level III, there are several more. Thus, the bond issuer increases the demand for papers and can attract them in a larger size and on more favorable terms. To obtain a Tier II listing, the following requirements must be met:

the issue volume is at least 500 million rubles;
the nominal value of bonds should not exceed 50,000 rubles or 1000 units (dollars, euros, etc.);
the issuer exists for at least a year or at least 3 months with a guarantor (guarantor);
no default of the issuer or more than 2 years have passed since that moment;
preparation of the financial report for 1 calendar year;
the issuer or the guarantor (guarantor) has a credit rating level.
Level I
This group includes federal loan bonds (OFZ). The most liquid and reliable bonds on the Moscow Stock Exchange. There are other bonds, for example, bonds of Sberbank, other large state companies and not only. Requirements:

Issue volume is at least 2 billion rubles;
the nominal value of bonds not exceeding 50,000 rubles or 1000 units (dollars, euros, etc.);
issuer (guarantor) has been in existence for at least 3 years;
no default by the issuer or it was more than 2 years ago;
preparation and disclosure of financial statements for 3 calendar years;
availability of credit rating according to the exchange terms;
Compliance with corporate governance requirements (paragraph 2.20 of Annex 2 to the Listing Rules).
When the securities are listed on the stock exchange
It takes time to check all requirements. A Level III listing takes 31 days for the exchange, while Level II and Level I take 41 days. To start trading, the company still needs to go through the placement of securities. Then a placement date is set and the first securities transactions, which at the beginning were just an idea, take place.

 

 

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