Introduction To London Stock Exchange Capital Markets

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Introduction to London Stock ExchangeCapital Markets

ContentsBackground01Raising capital02Main Market02AIM03Global Depositary Receipts (GDR)04London Stock Exchange – Providing China Access to global Markets04Trading equities05SETS05SETSqx05SEAQ05International Order Book05Top 50 most trade equity securities06Exchange Traded Funds07ETFs on London Stock Exchange07RMB Development in London07Dim Sum bonds08Green bonds09What are green bonds?09How to list green bonds10London Stock Exchange ‘green bond’ milestones10

BackgroundLondon Stock Exchange Group is a diversified international market infrastructure and capitalmarkets business sitting at the heart of the world’s financial community. This guide providesan overview of some of the key offerings from London Stock Exchange’s Capital Markets.225 Asian equity issuers listed on London Stock Exchange marketsSince 2005, growing companies from China have raised over 2.6 billion on our marketsOver 1/3 of the 204 securities in the IOB DR markets are from Asia 5.3 billion daily turnover on London Stock Exchange’s cash equitiesFTSE was the first index provider to create a comprehensive range of China indices coveringthe full spectrum of Chinese share-types and asset classesETFs and funds tracking the FTSE China A50 Index and FTSE China 50 Indexhave respectively 12.6 billion and 9.6 billion of Assets Under Management*31 Dim Sum bonds and 6 RQFII ETFs on London Stock Exchange marketsRMB and HKD trading currency lines offered for ETFs trading service.* as of 30 April 2015Access to London’sdeep pool of liquidity01Capital Markets introduction

Raising capitalLondon Stock Exchange is home to about 2,500 companies and offers a choice of fourmarkets: the Main Market, the Professional Securities Market (PSM), the Specialist FundMarket and AIM, reflecting our responsiveness to the differing needs of companiesfrom around the world, and across all sectors.Main MarketBenefits for issuers—— Fundraising opportunities on a wide choice of publicmarkets to suit issuers of different sizes anddevelopment statusThe Main Market is our flagship market for larger,more established companies.—— Cost-efficient access to a deep liquidity pool featuringthe most international and diverse investor base—— Increased visibility and profile alongside aninternational peer group—— A pragmatic approach of principle based regulationand the highest standards of corporate governance—— High-quality services by a strong community ofexperienced and sophisticated financial professionals.London Stock Exchange is home to some of the world’slargest and most dynamic global companies. Underpinnedby London’s balanced and globally-respected standardsof regulation and corporate governance, the Main Marketrepresents a badge of quality for every company admittedand traded on it and an aspiration for many companiesworldwide. There are different routes to market cateringfor a range of businesses and securities:PremiumCorporations in the Premium segment are constituentsof the FCA’s Official List and are subject to the higheststandards of regulation and governance.Capital raisings by our issuersMoney raised USDmIndex points70k8k7k60k6k50k5k40kStandardOpen to shares, depositary receipts and debt securities,the Standard segment is subject to EU minimum standardsand is also part of the Official List.High Growth SegmentThis segment has been specifically designed for equitysecurities of high growth, revenue generating businessesthat are over time seeking to become Premium listedcompanies.Joining the Main Market4k30k3k20k—— UK Listing Authority (UKLA), a division of the FinancialConduct Authority (FCA) to approve the prospectusesand admission of companies to the Official List—— London Stock Exchange to admit companies totrading on the Main Market.2k10k1k02Capital Markets 0620050k2004Graph key0kNew issuesFollow on issuesFTSE 100 Index

Equity primary marketsAIMAIM is regarded by advisers, investors and companiesas the most successful growth market in the world, havinghelped thousands of ambitious companies raise the capitalthey need to fund their growth and development. With thesupport of a dedicated community of advisers, AIM hasgrown from ten UK companies in six sectors to over 1,000companies worth over 68 billion operating in more than90 jurisdictions across 40 sectors.Preparing to join AIMOnce you have decided that being a public company onAIM is the right option for your company’s future growth,you should consider the following points:Business strategyAs a prospective AIM company you should have a clearvision and well-thought-out business plan showing howyou will deliver growth and shareholder value.Appropriate board structureCompany directors must be appropriate and capable of actingon a board of an AIM company. They will be responsible forensuring your company’s compliance with the AIM Rules atadmission and on a continuing basis. Your company’s boardmust consist of executive directors, managers of the businessand non-executive directors serving as representatives of allshareholders. Non-executive directors can be an invaluableresource providing your company with a wealth of industryand financial markets experience and contacts.Corporate structureYour business will need to have an appropriate legalstructure in place, allowing external investors to buy ashare of the business. The structure of a sole trader ora partnership is not suitable for a public market.Appoint a Nomad and other key advisersThe Nomad will be the main adviser to your companyduring the admission process and thereafter. Other advisersalso perform critical roles in the admission process andin supporting your company. They include a broker,a reporting accountant, legal advisers, public relationsand investor relations firms.Communicating with investorsBecoming a quoted company will involve changes in theway your company is run. Outside shareholders will receivea stake in your business in return for the capital they provideand will expect the business to be run for the benefit of allshareholders. Clear communication with investors will createan awareness and understanding of your company and helpyour company gain access to capital, increase liquidityin the company’s shares and achieve a fair valuation.At a glanceNumber of AIM companies1,077International AIM companies(by country of incorporation)211Aggregate market value 72.6 billionTotal number of admissions since launch— UK— International3,5912,947644Total capital raised since launch— New— Further 92 billion 40 billion 52 billionTransfers to Main Market167Number of admissions in 2014 YTD118Total capital raised in 2014 YTD— New— Further 5.7 billion 2.6 billion 3.1 billionNumber of Nomads40Value traded in 2014 YTD 42.8 billionNumber of bargains in 2014 YTD6.7 millionNumber of Market Makers52Source: London Stock Exchange statistics – September 201403Capital Markets introduction

Global DepositaryReceipts (GDR)London is a leading global GDR market. Close to 200 DRprogrammes (204 securities) from 43 countries are listedand traded on London Stock Exchange. London StockExchange operates the only dedicated GDR trading platformin the world – the International Order Book to admitcompanies to trading on the Main Market.GDR issuers have raised close to USD 50 billion in Londonin 119 transactions over the last decade. In the process,a diverse and well established market infrastructure thatsupports overseas listings developed in London.The London financial community has a long standingtradition in cross border transactions, drawing upon thewealth of knowledge and expertise of the large network ofinvestment banking advisers, leading research analysts,legal advisers and other specialist consultants.Today more international equity is managed out of London(c USD 1.9 trillion) than anywhere else in the world.London Stock Exchange –Providing China Accessto global MarketsMain MarketAIMNumber of Chinese companies849Total market capital 171 billionTotal money raised in last10 years (USD) 4 billion 4.2 billionInvestor diversification – ownership of LondonStock Exchange listed Chinese businesses48% 37% 14% 1%EuropeNorth AmericaAsiaOtherSelected institutions with holdings in LondonStock Exchange listed Chinese companiesBlackrock Investment ManagementFidelity Worldwide InvestmentLondon is a leadingglobal GDR market.Close to 200 DRprogrammes from 43countries are listedand traded on LondonStock Exchange.Invesco Asset ManagementJPMorgan Asset ManagementNorges Bank Investment ManagementHenderson Global InvestorsLegal & General Investment ManagementLazard Asset ManagementNumber of China-focused companies by ICB industry25%15%13%13%12%12%5%3%2%FinancialsBasic materialsTechnology04Capital Markets introductionConsumer goodsConsumer servicesHealth careIndustrialsOil & gasUtilities

Trading equities 5.3bnDaily average valuetraded in equitysecurities 520maverage dailyturnover on IOBLondon Stock Exchange trading servicesare designed to maximise liquidity for allparticipants, including about 360 members.Four key trading services are available.SETSSETS is London Stock Exchange’s flagship electronicorder book, trading FTSE 100, FTSE 250, FTSE Small Capindex constituents, Exchange Traded Funds and ExchangeTraded Products as well as liquid AIM, Irish and LondonStandard Listed securities.—— Underpinned by the provision of Market Makers’electronically executable quotes throughout the tradingday, providing liquidity in at least one Exchange MarketSize (EMS)—— Ability to participate in the price formation processthrough placing order types such as ‘limit’ and‘immediate or cancel’ directly onto the order book—— Opportunity to trade at the day’s actual closing pricethrough the provision of the closing auction and thefollow-up Closing Price Crossing Session.SETSqxEquitysecurities bytrading service922SETS958SETSqx523SEAQ204SETSqx (Stock Exchange Electronic Trading Service –quotes and crosses) is a trading service specifically designedfor securities less liquid than those traded on SETS. SETSqxcombines a periodic electronic auction book withstandalone non-electronic quote-driven market makingproviding guaranteed liquidity in at least one ExchangeMarket Size (EMS) throughout the trading day.—— Suitable for less liquid instruments that are morereliant on Market Makers’ quotes——Possibility to participate in the closing formation——Process by trading in the closing auction—— Choice of trading in either the quote-driven or orderbook auction service—— Auctions are scheduled at 9.00, 11.00, 14.00 and 16.35.Electronic orders can be named or anonymous onsubmission and, for most securities, order bookexecutions will be centrally clearedIOB—— Closing price is set by the mid of the Market Makerscollective Best Bid Offer, where there are no matchedclosing auctions orders.05Capital Markets introductionSEAQLondon Stock Exchange’s non-electronically executablequotation service that allows Market Makers to providefirm quotes in AIM securities that are not traded on SETSor SETSqx. It is not available for new securities.——Liquidity provided by Market Makers——Provision of two-way prices in at least one EMS—— Suitable for less liquid instruments that would be morereliant on Market Maker quotes—— Only registered Market Makers can directly participateon-screen in the price formation process——No maximum spread regime or CCP provision.International Order BookLondon Stock Exchange operates the InternationalOrder Book (IOB), which offers cost-efficient, secure andtransparent access to invest in some of the world’s fastestgrowing markets.—— Direct access to depository receipts from 43 countriesincluding Russia, Central and Eastern Europe, Asiaand the Middle East—— Largest market in Russian instruments outsideof Moscow—— Growing sharing of trading on Asian securities includingSamsung Electronics, Hyundai Motors, RelianceIndustries and State Bank of India—— Deep pool of liquidity and Central Counterparty clearingservice for approximately 100 members—— Member firms can register as Market Makers in anyIOB security—— Provides a deep and liquid market through thesimilar underlying technology infrastructure foundon SETS.IOB issuers by country as ofincorporation as of end of April 201539Russian uth Korea4Kazakhstan10Egypt58Other


Exchange Traded Funds 775mDaily averageon-exchangeturnoverDid you know that ?—— Assets in ETFs/ETPs listed in Europe reached a newrecord of US 511 billion at the end of April 2015—— European ETF’s share of the region’s cash equitiesturnover has grown from 5% in 2009 to 9.6% asof the end of January 2015—— European ETFs comprised 3.4% of the continent’smutual fund industry as of February 2015ETFs on London StockExchange6RQFII ETFs listed—— London Stock Exchange Group won the global ETFaward as the biggest European exchange for volumeand the most proactive exchange—— London Stock Exchange ETF trading is the largestin Europe with 34.4% market share in April 2015RMB Development in LondonL ondon is at the forefront of RMB development and hastaken key steps to support this new initiative:—— RQFII provides UK investors access to Chinese mainlanddomestic markets—— 5 RQFII Equity ETFs listed since 2014 giving investorsdirect exposure to Chinese A-Share equities for thefirst time—— The first London listed RMB denominated moneymarket ETF was launched in March 2015, givingEuropean investors access to China Interbank BondMarket securities—— London Stock Exchange offers off-shore CNY and HKDas trading currencies for ETFs listed on our market,supported by clearing and settlement—— These developments reflect great investor demand foraccess to China and contribute to London’s emergenceas a leading global centre for RMB trading.—— Total ETF/ETP on-exchange turnover for 2014 was 186.3 billion with 2.3 million trades—— Since the first ETF listing in 2000, London StockExchange has become home to over 1,100 ETFs andother ETPs with 25 issuers, the largest and mostdiverse product range in Europe—— Strong demand from both institutional and retailinvestors for investing in cost-efficient, diversifiedproducts has contributed to this growth—— There are 22 registered market makers and over 100other member firms actively trading ETFs and providingliquidity throughout the trading day—— Possible to trade each ETF or ETP in up to six currencylines (GBP or GBp, EUR, USD, CHF, HKD and RMB)—— All ETFs and ETPs on London Stock Exchange aresupported by at least one market maker committedto providing two-way prices within maximum specifiedspread and minimum quote size—— Market transparency through the reporting of all orderbook trades as well as off-book trades in London StockExchange ETFs and ETPs—— OTC Trade Reporting allowing the print of non-LondonStock Exchange listed European ETFs.07Capital Markets introductionRMB ETFs – the First Step into ChinaInternational investors have the opportunityto access Chinese Equities and Fixed Incomemarkets on London Stock ExchangeLondon Stock Exchange has establishedsecondary market trading arrangements fortrading, clearing and settlement in ChineseRenminbi (CNY) and Hong Kong Dollar (HKD).Post trade infrastructure becomes easieras the system is already set up for RMBdenominated securities listed in London.

Dim Sum bonds31Dim Sum bondslisted on LondonStock Exchange’smarketsThere are currently 31 Dim Sum bonds listed on London Stock Exchange’smarkets with a combined outstanding amount of CNY 23.6 billion.Benefits of listing debt in London—— Listing on a highly visible market allows companiesto raise their profile with investors globally—— Great flexibility for issuers, in terms of bond structuringand currencies—— Choice of two routes to market, Main Market listingor Professional Securities Market (PSM)—— A single gateway to access European and global investors17th June 2010First RMB denominated bond – Listed on LondonStock ExchangeMay 2012First RMB retail denominated bond – Listed and tradedon London Stock Exchange—— Competitive listing cost, London Stock Exchange doesnot charge an annual fee for debt issuers.January 2014The largest RMB bond issue outside Greater ChinaListing debt in London – a two-stage processJune 2014The first green dim sum bondListingAdmission to the UK Official List (UK ListingAuthority / Exchange Admissions Team)Admission to tradingAdmission to London Stock Exhange’smarkets managed by the ExchangeAdmissions TeamAccess the most liquiddebt market in Europe08RMB Bonds – growing momentumCapital Markets introductionOctober 2014UK Government issues the first non-Chinese sovereignoffshore RMB bondMarch 2015CCB lists first ever RMB-denominated money marketETF in international formDim Sum bond issues in 2015IssuerIssue dateIssue sizeCommonwealthBank26 February 2015CNY 260 millionCommonwealthBank9 March 2015CNY 187 millionNBAD17 March 2015CNY 200 millionQNB Finance26 March 2015CNY 160 millionQNB Finance1 April 2015CNY 190 millionQNB Finance2 April 2015CNY 200 millionFirst Gulf Bank9 April 2015CNY 400 millionCommonwealthBank9 April 2015CNY 150 million

Green bondsWhat are green bonds?‘Green bonds’ are any type of bond instrument where theproceeds will be exclusively applied to finance or re-financein part or in full new and/or existing eligible ‘green’ projects.The key feature of green bonds is the use of proceeds, whichare described in the bond’s legal documentation, separatelymanaged within the company, as well as monitored andreported throughout the life of the instrument. Categoriesof potential eligible green projects include renewableenergy, energy efficiency, sustainable waste management,sustainable land use, biodiversity conservation, cleantransportation, climate change and adaption.With growing investor emphasis on sustainability, greenbonds are one of the fastest growing market segmentsinternationally. A record 36 billion of green bonds wereissued in 2014, almost tripling 2013 total green bondissuance, and global green bond issuance is expectedto reach the 100 billion mark in 2015.Global issuance (USD) billions100806040LSEG is a partner exchange of the United NationsSustainable Stock Exchanges (SSE) initiative.London Stock Exchange Group’s activity in green financingis focussed on two key areas: fixed income products andinformation services/indices. Through a range of newinitiatives, LSEG intends to broaden its offering and supportLondon in becoming the preferred listing venue for debt andequity Low Carbon Economy (LCE) financial instruments.Through its FTSE Russell business, LSEG is looking at furtheropportunities to increase transparency in the green bondmarket, by providing issuers with a more efficient tool toreport on sustainable initiatives, and offering investors acomprehensive product to assess a wide range of financialinstruments against an innovative LCE framework.09Capital Markets introduction2000.006732011201220132014Sources: actual data from Bloomberg; projectionsfrom Climate Bond Initiative (

How to list green bondsGreen bonds have the same regulatory status of equivalent“non-green” bonds and can normally be issued throughstandard base prospectuses. To admit green bonds toLondon Stock Exchange’s dedicated ‘green bond’ segments,issuers are required to provide the Exchange with therelevant “second opinion” document that certifies the‘green’ nature of the bonds (see below). The choice of thecertification provider is up to the issuer and its advisers.London Stock Exchange has outlined guidance on a setof criteria that the certifier should meet in order for thecertified instruments to be included in the relevantLSE green bond segment.Issuers admitting bonds to the “green bond” segmentson London Stock Exchange must provide a third partycertification that the instruments are considered “greenbonds” and a written confirmation that the entity that hasbeen appointed to conduct the green bond certificationmeets the following criteria:—— Be a legal entity with a registered office in the EuropeanEconomic Area or Switzerland and that such entityhave the required financial resources to conductthe verification—— Be independent of the entity issuing the bond, itsdirectors, senior management and advisers. In particular,the organisation providing the second opinion must notbe a subsidiary or owner, either in full or in part, of theentity issuing the bond—— Be remunerated in a way that prevents any conflictsof interests arising as a result of the fee structure—— Have the required financial resources to conductthe verification—— Be an entity* specialising in assessing the frameworkof the bonds’ environmental objectives, with sufficientfinancial and market-specific expertise to performa comprehensive assessment of the use of proceeds.Such expertise could be demonstrated for example by:– Affiliation with relevant and widely recognisedindustry bodies; or– Significant and appropriate previous experiencein providing second opinions on green bonds.* e.g. a research organisation or a certification company, or an entity of whichone of its departments offer services in the relevant certification industry10Capital Markets introductionLondon Stock Exchange‘green bond’ milestonesQ4 2009First green bond listed by World Bank on London StockExchange’s marketsMay 2014London Stock Exchange Group joins UN’s Sustainable StockExchanges (SSE) initiativeQ2 2014International Finance Corporation (IFC) issues the firstRenminbi-denominated green bond, raising RMB 500million. This was the first green bond issued by amultilateral institution in the offshore Chinese marketsQ2 2015Transport for London lists its debut green bond, raising 400 million, to improve sustainability of Londontransport networkQ3 2015London Stock Exchange expands its range of dedicatedgreen bond segments to offer increased flexibility for issuersLSEG has welcomed 15 green bonds to its markets, raisingmore than 2.5 billion. In 2014, nine green bonds werelisted on LSE. London Stock Exchange has recentlylaunched two new dedicated ‘green bond’ segments as partof the Order book for Fixed Income Securities and anadditional set of ‘green’ segments offering trade reporting,end-of-day and continuous quoting options. No otherglobal exchange has such a comprehensive specialistoffering for green bonds.Issuers can benefit from the additional transparencyof secondary market trading and global reach of theLondon markets.

Notes11Capital Markets introduction

Notes12Capital Markets introduction

London Stock Exchange10 Paternoster SquareLondon EC4M 7LSTelephone 44 (0)20 7797 1000www.lseg.comPrimary Markets TeamTelephone 44 (0)20 7797 & Derivatives TradingTelephone 44 (0)20 7797 TeamTelephone 44 (0)20 7797 ixed Income TeamTelephone 44 (0)20 7797 bbondsLondon Stock Exchange plc is authorised by the Hong Kong Securities and Futures Commission under Part III of the Hong Kong Securities and Futures Ordinance to offer to provide automated tradingservices in Hong Kong. The contents of this brochure have not been reviewed by any regulatory authority in Hong Kong. This brochure is for information purposes only. London Stock Exchange plchas made reasonable efforts to ensure that the information contained in this brochure is correct at the time of printing, but shall not be liable for any decisions made in reliance on it. June 2015 London Stock Exchange plc. Registered in England & Wales No 02075721.

01 Capital Markets introduction London Stock Exchange Group is a diversified international market infrastructure and capital markets business sitting at the heart of the world's financial community. This guide provides an overview of some of the key offerings from London Stock Exchange's Capital Markets.

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