Background
The Unlisted Securities Market (USM) was a segment of the London Stock Exchange established to facilitate the trading of shares for smaller companies that did not meet the more rigorous listing requirements of the main exchange markets. It provided a platform for these firms to access capital while offering investors opportunities to invest in potentially high-growth businesses.
Historical Context
The USM was created in response to the demand for a more accessible market for smaller companies with emerging growth potential. This market existed to support the economic dynamism of smaller enterprises by providing them with a trading venue from 1980 until its abolition in 1995.
The London Stock Exchange operated the USM as a way to bridge the gap between private companies and the highly regulated main market, easing the process for smaller, ambitious companies to grow through equity finance.
Definitions and Concepts
- Unlisted Securities Market (USM): A defunct segment of the London Stock Exchange focused on smaller companies with fewer regulatory requirements compared to the main market, allowing these firms to gain access to public capital markets.
Major Analytical Frameworks
Classical Economics
Classical Economics largely focuses on the importance of markets being left to operate freely. The USM, by lowering barriers to entry, reflected the classical economic ethos of minimal regulation where appropriate.
Neoclassical Economics
Neoclassical Economics, with its emphasis on supply-demand equilibrium, would view the USM as facilitating market efficiency by helping smaller firms access the necessary capital to reach their full productive potential.
Keynesian Economics
From a Keynesian perspective, the USM can be seen as a mechanism to boost aggregate demand through increased investment in growing firms. By offering an easier route to public listings, it might help spur economic activity and innovation.
Marxian Economics
Marxian Economics would analyze the USM within the context of providing smaller capitalists an avenue to accumulation and competition, which might contribute to the overall capitalist dynamics of the financial markets.
Institutional Economics
Institutional Economics would focus on the regulatory framework guiding the USM, suggesting that its less stringent listing requirements created an influential market structure distinct from the main market.
Behavioral Economics
Behavioral Economics might investigate the types of companies listed on the USM and investor behaviors, exploring why investors might choose to participate in a less regulated market and how information asymmetry might be mitigated.
Post-Keynesian Economics
Post-Keynesian Economics, with its emphasis on the role of uncertainty in economic decisions, would concentrate on the perceived risks versus potential rewards that companies and investors faced in the USM.
Austrian Economics
Austrian Economics would focus on the entrepreneurial opportunities facilitated by the USM, viewing it favorably as a market that encourages innovation and individual enterprise.
Development Economics
From the perspective of Development Economics, the USM would offer insights into how emerging businesses in developing market segments could achieve growth through easier access to capital.
Monetarism
Monetarists would be interested in the USM’s impact on the money supply mechanism, analyzing how increased capital flow to smaller firms might affect broader monetary policies.
Comparative Analysis
The USM can be compared with modern secondary markets and alternative trading systems that similarly provide smaller companies with access to public equity. Analyzing the succession of the USM may reveal patterns in how financial markets evolve to accommodate dynamic sectors.
Case Studies
Case studies can look into specific companies that benefitted from listing on the USM, investigating their growth trajectories and subsequent success or failure.
Suggested Books for Further Studies
- “The Rise of Financial Markets: Understanding Key Features” by Richard Roberts
- “Entrepreneurial Finance and Private Equity” by Janet Kiholm Smith and Richard L. Smith
Related Terms with Definitions
- Alternative Investment Market (AIM): A sub-market of the London Stock Exchange offering less regulation and greater opportunities for smaller, growing businesses.
- Secondary Market: Where existing securities are bought and sold, differing from primary markets where securities are issued.
