What changes?
Both the Euro MTF, as well as the Regulated Market of the Luxembourg Stock Exchange are from now on equipped with their respective Professional Segments reserved to qualified investors, i.e. non-retail investors.
The introduction of these segments represents a more efficient alternative for products exclusively targeting professional investors (including eligible counterparties) as per the MiFID classification and where a listing and admission to trading is still required.
Furthermore, such segments will also be of interest to investment funds, such as Reserved Alternative Investment Fund which are only open to qualified investors.
What are the advantages?
The advantages for issuers and Investment Service Providers are multifaceted, range from issuance to distribution and notably consist of the following:
Lenient prospectus requirements:
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By virtue of Regulation (EU) No 2017/1129 the content of a prospectus is subject to less onerous standards provided that:
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trading involves solely non-equity securities
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trading over the securities is exclusively accessible to qualified investors
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securities are not subsequently resold to retail investors
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Such reduced standards include inter alia:
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Less information and details are required
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The obligation to draw up a summary is waived, and
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The language requirements are flexible
Less product governance requirements under Directive 2014/65/EU (MiFID II):
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By using the professional segment, which is not accessible to retail investors, issuers can show that they do not target retail investors and this would therefore de facto simplify the obligations to periodically review/update:
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the product target market, and
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the product distribution strategy
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The Stock Exchange does not verify whether investors are qualified or not and it is for the Members to deny to place orders of retail investors.
No need for the Key Information Document (KID) under Regulation (EU) No 1286/2014 for packaged (including structured) products traded on Professional Segments (PRIIPs).
By using the professional segment, which is not accessible to retail investors, issuers can evidence that it does not target retail investors and therefore avoid the KID for structured products.
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