LSE looks to tighten AIM rules and reduce volatility
The London Stock Exchange (LSE) will launch a consultation over potential rule changes for companies listing on AIM designed to stop volatile trading. The proposed change would see companies looking to list as investment companies requiring to show £6m on their books, double the amount currently required. The exchange said smaller companies often suffer from volatile market trading, which is not healthy for the companies or for the image of the market as a whole. It also plans to change rules for companies already on the market that become "cash shells", winding down existing operations and allowing a bigger company to buy it, shortening the time for a company to be listed as a "cash shell" from a year to six months.

London Stock Exchange in consultation to halt “volatile trading” on London’s Alternative Investment Market

The London Stock Exchange (LSE) is launching a consultation to change the rules for companies that want to list on London's Alternative Investment Market (Aim) to stop volatile trading on its exchange.

The LSE, which regulates Aim, is proposing to increase the amount of money that companies that want to list on Aim as investment companies – that is, companies which have no operations but wish to raise money to reinvest themselves – have on the books before listing from £3m to £6m.

"We've noticed smaller companies do sometimes suffer from volatile market trading, which isn't healthy for the companies or image of market as a whole. The price of the companies before they've even made an investment can swing wildly based on what they might or might not do," a LSE spokesperson said.

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It is hoped that the nature of companies that come to market will change by raising the amount of cash a company must have to £6m, which would also necessitate tighter scrutiny of strategy and institutional investors.

The best known example of this is Gates Ventures, which investors ploughed money into days after listing on Aim in March. By June its value had risen by over 1500 per cent, before its shares were withdrawn from trading on Aim in July.

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It is also changing the rules for companies already on the market but become "cash shells" – which wind down existing operations and allow a bigger company to buy it, the bigger company effectively taking over its listing. It is proposed that the time period for a company to sit as a "cash shell" should be shortened from a year to six months.

The idea behind this is that companies simply won't be able to sit on AIM for a whole year doing nothing.