Securities Regulation in Low-Tier Listing Venues: The Rise of the Alternative Investment Market

Abstract

As stock exchanges faced intense competition over the past few years, the success of a London-based junior listing venue - the Alternative Investment Market (AIM) - drew the collective attention of international market participants. Despite AIM's success, the causes underlying its growth have not been the object of extensive academic analysis. This paper will focus on the recent outbreak of low-cost listing venues in international financial centers and AIM's dominance in this particular niche. It will be contended here that AIM covered a funding gap for companies whose specific characteristics preclude them from listing in senior markets such as NASDAQ, the New York Exchange or the London Stock Exchange. This paper also suggests that AIM's regulatory model is optimal for the UK market - imposing low compliance costs on firms, but ensuring adequate disclosure and transparency levels - given the type of companies that seek an AIM listing and the sophisticated nature of its investors.