Latin American Capital Markets

406 HANNESTAKACS AND KINGA KORCSMAROSworkThe majority of SME markets have easier market admittance rules than the mainmarkets.The listing requirements for SME markets are usually lower in the following:• Market capitalization• Percentage of free-floating shares• Number of shareholders needed• Minimum number of shares floated• Number of years of operation or audited accounts.SME markets differ in their transparency requirements. Although a minimumlevel of transparency is required, most exchanges also believe that more stringent disclosurerules for an SME outweigh the costs because of the comfort and confidencethey give to the market. As for initial investor ownership rules, some markets strivefor a higher and faster distribution of initial ownership in order to increase the numberof free-floating shares and thus enhance liquidity. By contrast, other markets wantto ensure that the initial investors remain vested in the success of their IPO and thereforeblock the sell-off of insider shares.Another important issue is the cost of listing for SMEs on their markets. MostSME markets charge an initial one-time fee (flat, scaled, or a combination) when acompany first lists on the exchange and also charge an annual listing fee. An exceptionis Ireland's Developing Companies and Exploration Securities Market, which leviesno introduction or annual fee. However; the associated costs of listing (lawyers,accountants, bankers, and notaries) are usually the most expensive part of the listingprocedure.Liquidity is another important issue for SME markets, many of which do nothave minimum volume requirements for the continuance of listing.The most commonrequirement set by SME exchanges is the appointment of a market-maker/liquidityprovider Liquidity providers (specialists or market makers) are used for keeping bidaskspreads low and promoting turnover Furthermore, in some markets, it is the explicitresponsibility of the liquidity provider to improve the information flow on thelisted company.The use of liquidity providers is an old, proven technology: it createsadvantages for issuers and investors as well as for the liquidity providers.Beyond offering trading systems that have a positive effect on liquidity, exchangesoffer several other services to their SME clients:• Presentation and creation of media attention and publicity for the SME marketand its companies at different forumsCopyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub