What is the ISDX market?


Apart from shares listed on the Alternative Investment Market as well as stocks listed in the FTSE Small Cap and FTSE Fledgling indexes, the only other recognised investment exchange in the UK is ISDX (formerly known as PLUS Markets) which is now owned by ICAP. The ISDX exchange (full name ICAP Securities and Derivatives Exchange) has developed a name for companies using it as a stepping stone for gaining entry into AIM.

ISDX market refers to the old OFEX (Off Exchange) market. It is a small cap stock exchange centred in London. You may be familiar with the AIM market, which is probably its closest rival. ISDX specializes in the retail industry, and is international in outlook. At present it has less than 200 companies quoted.

ISDX is regulated by the Financial Conduct Authority (FCA), the governing body in the UK. It has two types of operation. The first, referred to as its primary market, is the listing of small cap companies. It focuses on the retail sector for these listings. It is much easier to be listed on ISDX than to get into the London Stock Exchange (LSE) listings. It's often the first time that the companies have sought public listing, and it opens the way for equity finance, particularly centred on the City of London. This helps the growth of the up and coming companies which gravitate to ISDX.

ISDX also operates a secondary market, and that is providing trading services. In this role, ISDX provides trading access to all London listed shares (not just those quoted by ISDX), to European shares and to AIM shares. The company gives real time data on all its secondary services. You can buy or sell ISDX listed stocks using a broker in much the same way as trading shares listed on the main exchange although not all brokers offer this service (some that do include Halifax Share Dealing, NatWest and TD Waterhouse).

One issue that challenges the business is that ISDX is not part of a larger financial exchange or financial operation. Unlike AIM, which stands for Alternative Investment Market, ISDX has a low profile and there are fewer brokers dealing in ISDX quoted shares. There is also little coverage from analysts on IDSX shares, so investors have to rely on the information provided by the listed companies which as we know is rarely a good idea. Most stocks quoted on ISDX are relatively illiquid and there is no requirement for stocks to have any market makers. AIM is a part of the LSE and allows more flexible entry regulations, but it still has the backing and experience of its big brother giving it an advantage over ISDX. Despite this, in its chosen market segment of retail the ISDX market has a strong foothold, dominating its competition and continuing to grow.

The companies quoted on the ISDX exchange are also growing in size, and some ISDX stocks are also quoted on AIM. The exchange is home to about 172 small and medium-sized companies and total capitalization of the ISDX companies amounts to over £2 billion. The largest two companies quoted on ISDX are each over the half billion pound mark. While most of the companies are UK based, 23 have headquarters based abroad. Four of the top ten companies in terms of capitalization are in the leisure and hotel category, and these consist of two football clubs and two breweries. In fact some of the more popular ISDX-listed companies include Arsenal (AFC:ISDX) and Rangers (RFC:ISDX) football clubs, as well as publisher Quercus (QUPP:ISDX). The main growth sectors recently have included leisure and hotels, real estate and telecoms. For those with an interest in Asian stocks and with an appetite for risk it is also worth noting that ISDX is also home to about half a dozen small Chinese businesses.

The outlook for the ISDX market is good, with the commitment of larger companies that seek the less restrictive rules compared to the bigger markets. The latest annual report anticipates with cautious optimism that the ISDX market will continue to grow and broaden its primary share listing market. Note that the bigger brokers such as Barclays and TD Waterhouse will allow you to trade ISDX-quoted shares in very much the same way they would allow you to trade those shares listed on the main London Stock Exchange.

 ...Continues here - Why do Penny Stocks and USA Shares have Wider Spreads?

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