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ExtraMOT PRO3: the new features of the Borsa Italiana segment

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30 January 2020

We summarise the recent amendments to the Rules of the ExtraMOT PRO3 segment of Borsa Italiana S.p.A. (Borsa Italiana).
LCD numbers on a stock exchange board

The Rules of the ExtraMOT PRO3 had already introduced significant changes, including (i) the digitalisation of the listing process via a specific online listing platform ("LoL") provided by Borsa Italiana: and (ii) the introduction of the Listing Sponsor, an entity that has recognised expertise in the capital markets and supports the issuers in the listing process and, later, in complying with the post-admission disclosure requirements.

Allen & Overy is a Fixed Income Partner of Borsa Italiana with regard to the ExtraMOT PROLinK services and is entered in the Listing Sponsors register held by Borsa Italiana.

Visit Borsa Italiana for more details.

The new features

On 20 January, certain technical amendments were made to the Rules governing the ExtraMOT PRO3 segment, which introduced the closing auction and trading at the closing auction price, in line with the MTA market rules. The amendments also envisage that, in the absence of a closing auction price, the reference price shall be determined on the basis of the contracts concluded during the continuous trading phase.

Background

In September 2019, Borsa Italiana launched a new bond segment, ExtraMOT PRO3, expanding the ExtraMOT market dedicated to the listing of bonds or debt securities, with the aim of boosting the growth of small and medium enterprises (SME) and those companies not listed on regulated markets, and/or with an issue value of less than EUR50 million. With this segment, Borsa Italiana aims to streamline the offering of financial instruments issued by small and medium enterprises with high growth potential, in light of the objectives of the Capital Markets Union.

Bonds or other debt instruments issued by joint stock companies and limited liability companies, cooperative companies, mutual insurance companies or entities, including local authorities or the companies they control pursuant to article 2359 of the Italian Civil Code, may, on application by the issuer, be admitted to negotiations on the ExtraMOT PRO3 segment. Furthermore, financial instruments, issued in the context of securitisations, involving underlying bonds listed on the ExtraMOT PRO3 segment  may be admitted to negotiations, as may so-called project bonds and infrastructure bonds.

From a macroeconomic perspective, under the framework of the introduction of the new market segment, Borsa Italiana published surveys, conducted by the Italian National Institute of Statistics (ISTAT) using a sample size of 168 listed companies, out of overall 2,170, on the impact of listing on the performance of businesses. The results  show that businesses that undertook a listing had an economic performance higher than the national average in terms of economic results. In particular, the ISTAT surveys prove that listing has a positive impact, both in terms of productivity and profitability. From the first point of view the increase in debt finance through bonds generates a growth differential in labour productivity equal to 2.6%. Furthermore, businesses that utilise bonds as debt instruments have five times the propensity to invest when compared with others. In terms of profitability, the increase in debt finance through bonds generates an increase in ROE equal to 0.4%.

The rules of ExtraMOT3

The admission of debt securities to the ExtraMOT PRO3 segment requires: (i) the publication of a prospectus drafted pursuant to EU Delegated Regulation 2019/980 or an EU Growth Prospect or admission document that meets the requirements of the regulation and the trading venue’s guidelines; and (ii) the publication and filing of the financial statements for the last audited financial year, unless otherwise provided in the applicable sector regulations (or in specific regulations governing infrastructure bonds). Furthermore, financial instruments must not be underwritten and/or purchased entirely by shareholders.

The process for listing on the ExtraMOT PRO3 segment is carried out online via a specific platform provided by Borsa Italiana. Pursuant to the Rules governing the ExtraMOT PRO3 segment, the issuer has the option to appoint a Listing Sponsor, a new figure in the Italian bonds landscape, which is given the task of assisting and supporting the issuer in the admission phase of the ExtraMOT PRO3 segment, and in the submission of the admission application and necessary documentation to Borsa Italiana. Following the admission, the Listing Sponsor shall support the issuer in the submission of documents relating to the post-admission disclosure obligations, which are instrumental in keeping the issuer’s investor relation page up to date on the ExtraMOT PROLinK portal.

The Listing Sponsor is an entity (such as a bank, advisor, legal adviser, fund, or arranger) with expertise in capital markets. Specifically, it must have: (i) worked in the field of debt capital markets and/or corporate finance for an adequate period of time, providing evidence of the main transactions carried out in the last five years; and (ii) a suitable reputation in providing professional and quality advice in relation to debt capital markets and/or corporate finance transactions. When Borsa Italiana has ascertained that such requirements have been met, it assigns the status of Listing Sponsor and registers the applicant in the register made available to the public in the relevant section of its website.

Borsa Italiana has also provided for a Fixed Income Partner, an entity of adequate standing, experience and operational capacity, with which it intends to share common know-how initiatives in connection with bonds markets.

As mentioned above, Allen & Overy is a Fixed Income Partner of Borsa Italiana with regard to the ExtraMOT PROLinK services and is entered in the Listing Sponsors register held by Borsa Italiana.

1The "Fixed Income Partner" role does not attribute rights vis-a-vis Borsa Italiana S.p.A. to those who use the services offered by the Partner, and any liability or responsibility of Borsa Italiana S.p.A. with regard to the quality of the services and other activities carried out by the Partner is excluded.