The decline in the number of public companies isn’t a transitory phenomenon, which means that a concerted effort to revitalize the appeal of public markets is needed, the World Federation of Exchanges (WFE) says.
In an open letter to regulators, policymakers and the investment industry, the industry trade group is sounding the alarm about the health of public markets — amid a rise in alternative asset classes, private markets and crypto assets — along with weaker liquidity and valuations in public markets.
“Companies are staying private longer or bypassing public markets entirely. Investors are looking elsewhere. And, as a result, the fundamental role of public markets in supporting innovation, job creation, and equitable wealth distribution is under threat,” it said.
Against that backdrop, the group’s letter — co-signed by the CEO of TMX Group Ltd. and vice-chairman of the WFE, John McKenzie, along with executives from various exchanges around the world, including trading venues in the U.S., Europe and Asia — called for action to rejuvenate public markets.
“We will launch a multi-year campaign to investigate and address the structural causes of public market decline, beginning with an urgent focus on the IPO drought,” it said, noting that globally, IPO activity is at a five-year low.
The WFE said its campaign will be based on research, cross-market collaboration and policy engagement, with a view to “[restoring] vitality to public markets worldwide.”
Among other efforts, the WFE said it will promote greater alignment between private and public markets, seek policy reforms to encourage IPOs and reduce market fragmentation, and promote confidence in the advantages of public markets.
“We will promote a model that embraces calibrated risk-taking in the interests of long-term growth and household security, building on literacy programs, the availability of independent research, the use of derivatives as well as securities, central clearing and the high-quality data that only exchanges can provide,” it said.
“Our ambition is simple yet profound: to ensure that public markets remain a dynamic, inclusive engine of global economic progress for generations to come,” it concluded.