Major reforms are underway in the London stock market to attract more flotation companies within the UK. In line with this, the Financial Conduct Authority shall have easier, simpler rules effective July 29 that scrap the two-tier system and give firms the right to bypass shareholder votes on big takeovers. While this aims to make the UK more competitive, some critics actually believe it risks weakening the quality of the market and reducing shareholder influence.

The big revamp of the London stock market is taking place in a bid to stop companies from going abroad. According to the reports, the Financial Conduct Authority is going to do this on July 29 to make the UK an increasingly beneficial country for companies listing shares.

The Big Change
The first big change the FCA will root out the two different types of listing: standard and premium. Premium listings came with extra red tape but bestowed on companies a fancier label and a place in the FTSE indices. Now, there will just be one regime for all. That would mean that companies no longer need to put big mergers or takeovers to votes of shareholders. Some think it will make things easier and cheaper for companies to expand. Others fear it will erode the power of shareholders.

Simplify Process:
The idea is that having a single set of rules should make it less complicated and expensive for firms to list their shares. “Our goal is to attract more companies to list, raise money, and grow in the UK while keeping high standards,” said Nikhil Rathi, the head of the FCA.

Background:
These are 2021 changes recommended by former EU finance official Jonathan Hill. The FCA has implemented some of Mr. Hill’s recommendations, slashing the minimum free-float threshold from 25% to 10% and allowing dual-class shares that enable founders to retain increased control.

Why This Matters:
These changes, the FCA said, would stop companies quitting London for places such as the US. “We need to change, or else our rules will fall behind other countries, and companies won’t choose the UK to list their shares,” said Rathi.

Consultants would rather consider areas of improvement within Europe that make better value for customers and enable firms to get more value out of new technology.
Not everyone is happy about the change. Dan Coatsworth, an investment specialist from AJ Bell, said: “The government is trying hard to raise more listings in the UK – but it could be at the expense of the quality of our stock market. Shareholders are going to have less of a say on big decisions like takeovers, and yet they own the companies.”

Recent Examples:
In recent months, a number of large companies have announced plans to list their shares elsewhere than in the UK. In May, Flutter, the group behind the bookie Paddy Power, announced it would move its primary listing to New York. The previous August, the UK chip designer Arm chose to list on Wall Street rather than in London. And in June, the British fund supermarket Hargreaves Lansdown recommended a private equity bid that could see it leave the FTSE 100 index.

Conclusion:
The revised Rulebook of the London stock market aims at increasing the attractiveness of the UK to companies looking to list their shares. The FCA hopes that this is just what is needed to halt the tide of firms moving abroad, but others have mixed views, citing that it comes at the cost of a weaker market and reduced shareholder power. Only time will tell whether the changes will eventually help or harm the London stock market.