London Calling? : The Experience of the Alternative Investment Market and the Competitiveness of Canadian Stock Exchanges

Stock exchanges are an important determinant of the competitiveness of Canadian capital markets. Regulators have recognized this fact when they have approved the consolidation of Canadian stock exchanges in 1999. The specialization of stock exchanges purported to enable them to cater more effectively to issuers and investors, and thereby to face the competition from foreign-based exchanges. Indeed, the competition has increased as foreign stock exchanges increasingly seek to attract listing from Canadian firms. In this respect, Canadian issuers' interest in listing on the Alternative Investment Market (AIM) of the London Stock Exchange (LSE) is a testament of this growing competition. Created in 1995 to allow companies to access public capital with a reduced regulatory burden, AIM has been extremely successful in attracting investors and issuers, including more recently a number of Canadian public companies. The attractiveness of AIM is intriguing for policymakers interested in the competitiveness of Canadian securities markets. Despite the interest generated by AIM, few studies have been devolved to this specialized stock exchange, either from an economic or regulatory perspective. And none of the existing studies has sought to analyze the relevance of the AIM model for Canadian stock exchanges, and, more broadly, the competitiveness of Canadian capital markets. From this perspective, the following analysis seeks to fill this research gap by providing a better understanding of AIM. Specifically, the objectives of this article are two-fold. First, this article examines the extent to which AIM has been successful with Canadian issuers. Second, it discusses whether the AIM model is informative for the regulatory approach followed by Canadian stock exchanges