New bond listing policies are sound

I refer to the Stock Market Review in The Times Business of March 3, by Edward Rizzo of Rizzo Farrugia & Co (Stockbrokers) Ltd.

Mr Rizzo complains about the reduced number of corporate bond listings, which he attributes to the introduction of new policies adopted by the Listing Authority in summer 2010. He advocates a further consultation process between the Malta Financial Services Authority, the Malta Stock Exchange, market practitioners and the Ministry of Finance on the new policies and its effect on new corporate listings. He states that the MSE should be at the forefront to see the number of listings increase.

I beg to disagree with Mr Rizzo. A privatised exchange would no doubt be at the forefront of such efforts, but that is precisely why I feel that the Exchange ought not to be privatised, at least for the time being, as in the latter case the MSE would act in a way that is indeed driven by turnover and profit, and this to the detriment of the financially unsophisticated majority of the investing Maltese public.

A well-functioning capital market is not necessarily brought about by seeking new ways of attracting more companies to list their securities, whether bonds or equities, but to ensure that only quality listings are accepted and that casualties causing financial loss to retail investors are minimised. The new Listing Rules reduce the possibility that companies who have their proposals for finance declined by banks appoint the same banks to act as managers for public bond issues to be taken up by the unsuspecting public.

It is therefore hoped that the MSE and the MFSA do not succumb to stockbroker sectarian interests lobbying and do not substantively dilute the new Listing Authority policies introduced in August 2010 after a consultation exercise that included the public. The sinking fund requirement, and the regulations governing the permitted passes in which such fund may be invested, in particular, are especially sound in view of the fact that Maltese corporate bond issues do not enjoy a credit rating issued by one of the household credit rating agencies.