The Luxembourg Stock Exchange has recently launched two professional segments on the EU-regulated and EuroMTF markets. Carlo Oly, Head of Relationship Management, explains the rationale behind.
Why has LuxSE decided to create separate segments for professional investors?
Carlo Oly: As a stock exchange, we list structured products aimed at both retail and institutional investors. Structured products are a core element of our activities and we are investing heavily in this space. Our objective is to be the most attractive listing venue for structured products. We are, therefore, constantly striving to enhance our offerings from a technological, commercial and, of course, regulatory perspective.
The trigger for our decision was the regulatory requirements under MiFID II. By using the professional segments, which are not accessible to retail investors, issuers can show that they only target qualified investors. This not only helps in the primary market but also when it comes to secondary trading as it can support distributors with their target market assessment.
An additional potential benefit for issuers is that the Key Information Document (KID) requirement under PRIIPS falls away.
What does it mean in practice?
Carlo Oly: The two professional segments we launched last week offer more choice to our issuers and provide an additional layer of transparency to investors. However, listing a product on the professional segment does not change the issuers and distributors’ legal obligations concerning investors’ qualifications. The exchange does not verify this assessment. The professional segments ensure that the labelling is transparent and clearly visible to all counterparties.
How has the market reacted?
Carlo Oly: Issuers and their legal advisers have welcomed the initiative, as it provides an additional layer of protection to ensure products end up in the targeted market segment.
Overall, we have seen a strong performance in structured product listing activity on our markets in 2018 (+/-10%), particularly from French and US investment banks that recognise the many benefits of a listing in Luxembourg. We expect this trend to continue in 2019 despite the more volatile market backdrop.
Parts of this interview were initially published on the Structured Retail Products news website.
