Recital 3

(3)To ensure the liquidity and profitability of SME growth markets, Article 33(3)(a) of Directive 2014/65/EU requires that at least 50 % of the issuers whose financial instruments are admitted to trading on an SME growth market are SMEs issuing equity and/or debt securities. Under Directive 2014/65/EU, SME equity issuers are defined as a company that had an average market capitalisation of less than EUR 200 million on the basis of the end-year quotes for the previous three calendars years. On the other hand, Commission Delegated Regulation (EU) 2017/565 ² provides that a non-equity (debt-only) SME issuer should meet at least two of the three following conditions: (i) the number of employees (less than 250); (ii) the total balance sheet (less than EUR 43 million); and (iii) the annual net turnover (less than EUR 50 million). This requirement for a non-equity issuer to qualify as an SME has been found to be too restrictive because such issuers tend to be larger than traditional SMEs. As a result, many non-equity issuers cannot qualify as SMEs under Delegated Regulation (EU) 2017/565, despite remaining relatively small. As they cannot meet the 50 % threshold of issuers qualifying as SMEs, many MTFs specialised in SME debt issuances or allowing both bond and shares issuances cannot register as SME growth markets. In turn, if operators of MTFs do not make use of SME growth markets framework, issuers on those MTFs cannot benefit from the lighter regulatory requirements foreseen to foster listings and issuances on these SME growth markets. In order to enable more MTFs to register as SME growth markets, the nominal value of an issuer's debt issuances (excluding loans) over the previous calendar year should therefore be laid down as the sole criterion for qualifying non-equity issuers as SMEs for the purposes of SME growth markets. The Commission will monitor the effectiveness of the new definition of non-equity SME issuer in enabling MTFs to register as SME growth markets and its impact on market developments and investor confidence.