The creation of Alternext is the third part of a programme to overhaul the Euronext list, aimed at improving the visibility and liquidity of small and mid cap stocks. The reform began with the launch of a new range of small and mid cap indices and continued with the merger of the three regulated markets – Premier Marché, Second Marché and Nouveau Marché – into a single list: Eurolist by Euronext.

Alternext was formed to offer an alternative route for small and midsized companies that want to come to the equity market but that may lack the human and financial resources needed to satisfy the requirements of a regulated market. Under the new European regulatory framework based on the Prospectus and Transparency Directives, all companies, regardless of size, are subject to the same requirements, both upon admission and throughout their listed life.

Alternext has been designed to meet the needs of companies seeking to raise capital in the markets, offering them easier listing requirements while providing investors with a level of transparency that will satisfy their demands.

Alternext is an exchange-regulated market, meaning that it is subject to a body of rules laid down by the market operator, Euronext, and applicable to all participants. It is not a regulated market, as defined by the Markets in Financial Instruments Directive of 21 April 2004.

Alternext is aimed at to small and midsized European companies that:

• want to issue securities to the public but feel they do not qualify for a listing on a regulated market, or
• have already made a private placement

When joining Alternext, companies making a public offer must have a free float of at least €2.5 million. They must also have published financial statements for the two previous years.

Once listed, companies are required post their financial statements on the Alternext website.

Although its listing requirements are streamlined, Alternext has implemented:

• rules on investor information
  
  

  • to qualify for admission, a company must present at least two years' financial statements
    
  • throughout its listing, it must publish audited annual and unaudited semi-annual reports on the Alternext website within four months of the period close
    
  • all price-sensitive information must be published immediately
    
  • breaches of the 50% and 95% ownership thresholds must be published
    
  • directors' dealings must be reported
    
    
• rules on investor protection
  
  
  • if a majority shareholder with more than 95% of the capital or voting rights intends to take a company private, it must offer to buy out minority shareholders at a price approved by an independent expert in a fairness opinion, an investor that acquires a controlling block of shares in a company must offer to buy out minority shareholders at the block price
    

• Central orderbook
  
  
  • Continuous trading
    
    The most liquid shares (i.e. those with more than 2,500 trades annually) are traded continuously between 9:00 and 17:30.
    
    From 7:15 to 9:00, orders can be entered into the central orderbook, where they accumulate without being traded.
    
    At 9:00, all the orders in the book are computer matched and an opening price is set through an opening auction. That price allows the largest number of shares to be traded.
    
    From 9:01 to 17:25, the market operates on a continuous basis.
    
    A pre-closing phase takes place between 17:25 and 17:30. As with the pre-opening phase, orders accumulate in the central orderbook but are not traded.
    
    At 17:30, all the orders in the book are matched for the closing auction.
    
    The last quoted price for a share, which is generally the closing price, is its reference price and is used as a basis for the following trading session.
    
    
  • Auction
    
    All other shares are traded through a daily call auction held at 15:30.
    
    From 7:15 to 15:30, orders accumulate in the orderbook but are not traded.
    
    When the order accumulation phase ends, buy and sell orders are centrally matched through an auction procedure to establish an auction price. This takes place at 15:30. The auction price of a share is its reference price and is used as a basis for the following day's auction.
    
    Between 15:30 and 17:30, orders accumulate in the orderbook but are not traded. These orders will be combined with those entered in the central orderbook between 7:15 and 15:30 the following day.
    
    

• Market making
  
  Shares can also be traded through a market making procedure.
  
  Market makers undertake to quote indicative bid/ask spreads for a minimum quantity of shares of their choosing during the following time periods at least:
  
  

  • 9:00 to 15:30 for auction traded shares
  • 9:00 to 17:30 for continuously traded shares
    
    

  If they wish, market makers can also operate between 7:15 and 9:00 and also from:
  
  

  • 15:30 to 19:00 for auction traded shares
  • 17:30 to 19:00 for continuously traded shares

  Market making is a bilateral process involving a market maker and a financial intermediary acting for its clients. Market makers undertake to quote bid/ask spreads at all times for a minimum quantity of shares of their choosing; they are approved by Euronext and trade their own capital. Prices and quantities are agreed between the market maker and the intermediary, so each trade is purely bilateral and binding solely on the two parties.