December 8, 2011 / 12:32 PM / 9 years ago

LSE looks to boost health of IPO market

* Stock exchange responds to criticisms of London IPOs

* Puts forward proposals to improve attraction of London

* Calls on government to abolish tax on share trading

By Kylie MacLellan

LONDON, Dec 8 (Reuters) - The London Stock Exchange has countered a string of concerns about its new listings market and put forward proposals to increase its competitiveness as the government battles to safeguard Britain’s position as a global financial centre.

Floundering activity and poor share performance this year have strained relationships between market participants, resulting in a public spat which saw both banks and investors put forward suggestions to smooth a company’s ride to market.

A rising number of banks involved in running deals, company’s shares trading below their offer price and a large quantity of pulled sales have been widely publicised, but the LSE offers data to the contrary in its report “Leadership in a changing global economy: The future of London’s IPO market”.

“Some of the issues that have been raised are real but I think they have been overblown,” Tracey Pierce, the LSE’s director of equity primary markets, told Reuters.

“We wanted to address some of the myths, present the reality of the situation and draw a line under a number of issues.”

As well as attempting to redress the perception of London as a listings destination, the LSE also makes suggestions to improve the process and increase the City’s attractiveness.

Earlier and wider meetings between companies and investors ahead of launching an initial public offering (IPO) and greater transparency on the structure of fees paid to investment banks would help improve trust within the market.

The LSE knocks down a suggestion reported in the press earlier this year that the British government should legislate to withhold a portion of banks’ fees until months or years after a float to determine whether it has been a success.

“Withholding banks’ fees is not the right solution and could have damaging implications for the health of London’s IPO market,” the report says.

“It would also be unfeasible to determine the extent to which banks should be held responsible for the long term performance of a company.”

But the LSE does call on the government to get involved in other ways.

A recent shake-up of Britain’s financial regulators has removed a requirement that they consider the UK’s competitiveness, the LSE says, arguing it should be reinstated.

The government is trying to protect London’s position as a global centre of finance and has rejected suggestions by European Union policymakers for a tax on financial transactions, describing it as “a bullet aimed at the heart of London”.

The LSE suggests the government should go even further and abolish stamp duty on share transactions, to help improve London’s competitiveness.

Findings by KPMG show this tax reduces the total value of UK-listed companies by over 133 billion pounds ($208.5 billion) and the total amount of UK capital investment by up to 7.5 billion pounds a year, it said.

“It is important in terms of developing not just the capital markets but the UK economy. The City bringing in IPOs both domestically and from oversees supports the growth of the UK economy,” said Pierce.

“The government have got a motivation to consider these suggestions.”

$1 = 0.6380 British pounds Editing by Helen Massy-Beresford

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