STSM041300 | Exemptions and reliefs: exemptions: growth market shares - recognised growth markets - how to qualify as a recognised growth market - the market capitalisation condition

A market can apply to be a recognised growth market if it is a recognised stock exchange or (with effect from 1 January 2024) a Financial Conduct Authority (FCA) regulated multilateral trading facility (MTF) and meets one of two conditions - see STSM041290.

The market capitalisation condition (section 99A(5)(a) FA 1986)

The condition is that a majority of companies trading on the market must be companies with market capitalisations of less than £450 million (since 1 January 2024, the previous limit was £170million).

A company’s market capitalisation is calculated by taking the average of the closing market capitalisations of the company on the last trading day of each calendar month (or part of a calendar month) in the qualifying period.

The ‘qualifying period’ is the shorter of:

1. the last three calendar years preceding the relevant time; or

2. the period beginning with the day that the company is admitted to trading on the market and ending at the end of the last calendar year preceding the relevant time.

A company is disregarded in the calculation where it is admitted to trading on the market in the calendar year in which the relevant time falls.

The ‘relevant time’ is any time that the market qualifies.

As the market capitalisation condition tests are backward looking (i.e., they are applied to past calendar years) a market must have had a company or companies admitted to trading on it in the calendar year prior to the year in which the condition is tested – so a brand new market will not be able to meet this condition until the second calendar year it has had companies admitted to trading on it.