Main Market

Definition of Main Market

The Main Market is the principal market for trading equities on the London Stock Exchange (LSE). It is characterized by rigorous listing requirements and offers greater liquidity compared to the Alternative Investment Market (AIM). Companies seeking admission to the Main Market must meet strict eligibility criteria, such as having audited financial records for at least five years and placing at least 25% of their share capital in public hands. The Main Market trades in over 2,500 securities, making it a critical component of the UK’s financial landscape.

Examples

Example 1: Company Listing

Company ABC, a tech giant, has a track record of 10 years and decides to list on the Main Market. It meets the listing requirements by showcasing five years of audited financial results and ensuring that 30% of its shares are available to the public.

Example 2: Liquidity Advantage

Firm XYZ, a consumer goods manufacturer, prefers the Main Market due to its high liquidity, allowing investors to easily buy and sell its shares, reflecting a more accurate market value.

Frequently Asked Questions

Q1: What are the benefits of listing on the Main Market?
A1: Benefits include access to a larger pool of investors, enhanced visibility and credibility, higher liquidity, and potentially lower cost of capital.

Q2: What are the listing requirements for the Main Market?
A2: Requirements include having five years of audited financial reports, at least 25% of shares in public hands, adherence to stringent governance and disclosure standards.

Q3: How does the Main Market differ from the AIM?
A3: The Main Market has more stringent listing requirements and offers greater liquidity compared to the AIM, which is geared towards smaller, growing companies.

Q4: Can foreign companies list on the Main Market?
A4: Yes, foreign companies can list on the Main Market if they meet the eligibility criteria and comply with regulatory requirements.

Q5: What types of securities are traded on the Main Market?
A5: The Main Market trades in a variety of securities, including equities, bonds, Exchange-Traded Funds (ETFs), and Global Depositary Receipts (GDRs).

Equities: Instruments representing ownership in a company, granting shareholders rights to assets and earnings.

London Stock Exchange (LSE): One of the world’s largest stock exchanges; it provides a platform for buying and selling stocks and other securities.

Listing Requirements: Criteria that a company must meet to be admitted to a stock exchange; includes financial, governance, disclosure, and regulatory standards.

Alternative Investment Market (AIM): A sub-market of the LSE for smaller, growing companies with more flexible regulatory requirements.

Online References

Suggested Books for Further Studies

“The Handbook of Financial Market Tools: A Comprehensive Guide to Market Instruments” by Glen Arnold
“Equity Markets in Action: The Fundamentals of Liquidity, Market Structure & Trading” by Robert A. Schwartz
“The Corporate Finance Handbook” by Jonathan Reuvid

Accounting Basics: “Main Market” Fundamentals Quiz

### What entities primarily trade on the Main Market of the London Stock Exchange? - [ ] Startups and newly established companies - [ ] Sole proprietors - [x] Established and large companies - [ ] Small businesses > **Explanation:** The Main Market is primarily for established and large companies that meet stringent listing requirements. ### What is a key listing requirement for the Main Market? - [ ] A minimum of one-year audited financial statements - [ ] 10% of shares in public hands - [x] Five years of audited financial statements - [ ] No minimum financial history > **Explanation:** Companies must provide five years of audited financial statements to be eligible for listing on the Main Market. ### What percentage of shares must be in public hands for Main Market admission? - [ ] 10% - [ ] 20% - [x] 25% - [ ] 50% > **Explanation:** At least 25% of a company's shares must be placed in public hands to be eligible for the Main Market. ### What is a significant advantage of trading on the Main Market? - [ ] Minimal reporting requirements - [ ] Limited investor pool - [x] Greater liquidity - [ ] No governance standards > **Explanation:** One of the significant advantages of the Main Market is its greater liquidity compared to other markets. ### Can small and growing companies list on the Main Market? - [x] Yes, if they meet the stringent criteria - [ ] No, only large companies can list - [ ] Only after listing on AIM first - [ ] They must stay on AIM > **Explanation:** Small and growing companies can list on the Main Market if they meet the stringent criteria set by the London Stock Exchange. ### How many securities are approximately traded on the Main Market? - [ ] 100 - [ ] 500 - [ ] 1500 - [x] Over 2500 > **Explanation:** The Main Market deals in over 2,500 securities. ### What is not a criterion for listing on the Main Market? - [ ] Rigorous governance standards - [ ] Financial disclosures - [ ] Audited financial history - [x] Listing on AIM first > **Explanation:** Listing on AIM first is not a criterion for listing on the Main Market. ### What makes the Main Market different from the Alternative Investment Market? - [x] More stringent listing requirements - [ ] Less stringent governance standards - [ ] Lower volume of trading - [ ] Restricted to UK companies only > **Explanation:** The Main Market has more stringent listing requirements and higher liquidity compared to AIM. ### Which market segment is designated for smaller, growing companies within the LSE? - [ ] Primary Market - [ ] Derivative Market - [x] Alternative Investment Market (AIM) - [ ] Forex Market > **Explanation:** The AIM is designed for smaller, growing companies within the LSE. ### Why might a company prefer the Main Market over the AIM? - [ ] Less visibility - [ ] Fewer investors - [x] Greater liquidity and credibility - [ ] Lower listing standards > **Explanation:** Companies might prefer the Main Market for its high liquidity and credibility among investors.

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