ISE regulatory functions to revert to Central Bank

THE CENTRAL Bank is to begin undertaking various regulatory functions relating to the Irish Stock Exchange, in line with EU requirements.

Since 2005, the Central Bank has delegated the scrutiny of prospectuses – which involves the review of prospectus documents for equity, debt and closed-ended funds – to the Irish Stock Exchange.

However, under EU legislation, these responsibilities must revert to the Central Bank by the end of the year.

Seven staff from the exchange have transferred to the Central Bank in preparation for the change, which was first announced by the Financial Regulator in April 2010.

A new corporate finance division within the markets directorate of the Central Bank, will have responsibility for the functions.

Separately, as part of a scheduled quarterly review, the Irish Stock Exchange has revised free-float data related to stocks on the exchange – ie, shares that are available for purchase in the public equity markets by investors.

Under the new calculations, which will take effect next Monday, Kerry Group’s free float will increase from 76.92 per cent to 82.61 per cent due to the recent reduction in Kerry Co-operative’s holding. This will push Kerry’s market weighting to 10.1 per cent, up from approximately 9.5 per cent, according to Davy Stockbroker.

Bank of Ireland’s free float has reduced from 57.9 per cent to 49.9 per cent.

The Irish Stock Exchange introduced a free-float based methodology when calculating its indices in 2007, rather than the old system which used the entire issued share capital of companies.

The Irish Stock Exchange recalculates the free-float for each company on the ISEQ each quarter. The recalculation can affect the weighting of the company in the index, but not the market capitalisation.

Under the EU’s Markets in Financial Instruments Directive (Mifid), liquid instruments are required to be identified not only by turnover but also by the free-float market capitalisation of the company.