The WFE publishes report into global SME markets

Published by: The WFE Research Team Oct 2018

The WFE has published a report (together with a supplementary dataset) entitled 'An overview of WFE SME markets', examining the current status of 33 SME markets across 29 WFE member exchanges.

WFE member exchanges have long recognised the importance of small and medium-sized enterprises (SMEs) to the economies in which they operate. To support the growth and development of these firms, many stock exchanges have established dedicated SME markets or trading segments that cater for these companies. Today's report builds on previous research into these SME markets and initiatives, which was undertaken by the WFE and the World Bank in 2015 and 2016.

Key highlights from today's report include:

  • As at end 2017, 6,807 companies were listed on 33 SME markets with a total market capitalisation of over USD1.3 trillion.
  • Over 12,000 companies have listed on these markets over their lifetime, raising a combined USD251 billion (based on data from 28 markets). 
  • SME markets vary significantly in size - the number of companies listed on a single market ranged from less than 100 to over 1,000, while the average market capitalisation of these companies ranged from less than USD2 million to over USD100 million.
  • While the liquidity of SME platforms is definitely a challenge on some markets (in 40% of markets the turnover velocity was below 15%), this is not consistent across markets (six exchanges had turnover velocity rates of over 100%). 
  • SME exchanges strive to find the balance between reducing direct and indirect costs to issuers and ensuring appropriate investor protection. While the market will often adjust both the initial and ongoing listing requirements and costs to take the specific needs of SMEs into consideration, they may also require the use of an advisor, or limit investment to more sophisticated investors.
  • All SME boards engage in market outreach to raise awareness of equity financing opportunities amongst target companies, and many provide additional dedicated support for these companies such as:
    • Creating a dedicated index for SME companies;
    • Ensuring research coverage of companies listed on SME markets;
    • Requiring or encouraging the use of market makers to enhance liquidity of SME stocks; and
    • Holding regular sessions on issues such as corporate governance, investor relations and broader financial literacy.
  • The number of SME platforms continues to increase with five new markets launched in 2017, and another in 2018.