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FirstNorth Baltic launches in Estonia

01.12.2007

On 19 November, legislation enabling the operation of alternative securities markets in Estonia entered into force. This date, along with the approval of its regulations by the Estonian Financial Supervisory Authority, marks the de facto Estonian launch of FirstNorth Baltic, a Baltic alternative market operated by local stock exchanges within OMX Group. Although Tark & Co first reported on the planned launch of FirstNorth Baltic earlier this year, the process has been delayed due to the need for legislatory changes.

In contrast to regulated markets, alternative markets or MTF (Multilateral Trading Facility) markets can be operated by either a market operator or a financial institution. The main difference to regulated markets is freedom from EU requirements for traded companies, although the local financial supervision authority has the right to enforce certain elements from EU directives at their own discretion (insider trading ban, among others).

FirstNorth is operating as MTF and Companies traded there are subject to the rules of FirstNorth and not the legal requirements of regulated market. Among the characteristics of MTFs are the following: lower requirements for admission to trading, lower requirements for information disclosure, lower exchange fees. Due to laxer requirements in FirstNorth, the risk in such investments may naturally be higher compared to a regulated market. Advantages of MTFs to the issuers include: provision of additional capital source without a heavy regulatory burden, additional PR in connection with the change in status (from private to public company), additional exit option for current shareholders.

One very distinctive trait of MTFs in general and FirstNorth Baltic in particular is the importance of Certified advisers who act as a mediary between the issuer and the exchange. The adviser must remain independent in relation to the issuer and perform certain reporting obligations towards the exhange. On the other hand, the adviser also has responsibilities towards the issuer, assisting in application proceedings to enter the MTF and advising the issuer on its obligations being just some of them. Certified advisers operate on a contractual basis, concluding respective agreements with FirstNorth Baltic prior to beginning activities.

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