OFEX is an unregulated company share trading facility to allow share dealing in unquoted companies and securities off-exchange.  It was launched in October 1995. 

WHO OPERATES OFEX? 

The facility is managed by J P Jenkins Limited (JPJ).  JPJ was formed by John Jenkins in 1991 to make markets in companies traded under the now defunct London Stock Exchange Rule 4.2 "matched bargain" trading facility.  JPJ undertakes to make markets in all OFEX securities and post price information via its screen-based vendor services, the Internet and various publications.  (JPJ is also a market-maker in certain companies and securities traded on the Stock Exchange's Alternative Investment Market "AIM".) 

WHICH RULES GOVERN OFEX? 

There are no London Stock Exchange regulations applicable to OFEX as trading is conducted off-exchange.  The OFEX facility itself is neither regulated nor a market.  As a member firm of the Stock Exchange however, JPJ is regulated by the Securities and Futures Authority (SFA).  Constituent companies must comply with general company law and the OFEX code of best practice.  If they are seeking to raise finance, companies must abide by the Public Offer of Securities ("POS") Regulations 1995.  The Insider Dealing provisions of the Criminal Justice Act 1993 are likely to apply to OFEX companies while the Takeover Panel is informed of any bid situations surrounding an OFEX company in the normal way by the parties concerned. 

WHO CAN JOIN OFEX? 

OFEX is open to companies of either PLC or Limited Liability status.  The facility welcomes both established trading companies or "start-up" enterprises which can meet the entry requirements.  These requirements include free transfer of shares, compliance with the POS requirements if a fund-raiser, provision of audited accounts or a detailed business plan if a "start-up", directors' declarations and basic company fundamental data.  All applications are reviewed by an independent panel of market professionals. 

WHERE IS OFEX? 

OFEX information is available via JPJ's sister company, Newstrack Limited.  Established in October 1993, Newstrack supports trading in Ofex securities by supplying trade and company data relating to all OFEX client companies through four vendor distribution channels, ADP (QSTLine), Bloomberg, ICV-TOPIC3 and Reuters.  Share price information is available on Newstrack's own Internet web site(s) as well as via ICV's PC-based Market-Eye product.  Newstrack also produces a subscription-based monthly publication, the "OFEX Monthly Review", which gives historical details of trading and corporate activity amongst constituent companies as well as other feature items. 
 

WHY CHOOSE OFEX? 

OFEX is supported by an independent market maker, JPJ, and an independent news service, Newstrack, thereby providing a trading facility with an enhanced profile attached to it by virtue of the easy and free access to Newstrack.  The OFEX trading facility can potentially provide active trading in the shares and a means of raising fresh capital.  Constituent companies also enjoy the relatively low cost and minimal administration associated with OFEX. 

IS OFEX A MATCHED BARGAIN FACILITY? 

To describe OFEX as just a matched bargain facility is both inaccurate and simplistic.  As the sole independent market maker in OFEX securities, JPJ will conduct trading either on a matched bargain basis or in conventional market-making fashion (ie. taking and running positions in the stock).  Much depends on the "liquidity" of the stock in question, a factor determined by the availability, or otherwise, of a company's shares. 

WHERE CAN I FOLLOW THE PRICES OF OFEX STOCKS? 

Your stockbroker can always access OFEX prices through one of the main vendor networks, but in addition the majority of OFEX prices are now published each day in the Financial Times.  The London Evening Standard also carries certain company share prices each day.  All OFEX prices are published on Newstrack's Internet site(s) and on ICV's PC-based Market-Eye product. http://www.ofex.co.uk 

HOW CAN I DEAL IN OFEX SECURITIES? 

Investors in OFEX securities must use a stockbroker when wishing to deal in the shares of constituent companies.  JPJ does not deal directly with private clients.  Investors must seek advice on tax relief as legislation does change and EIS status is not permanent for a company's shares.  A stockbroker must explain the inherent risks attached to an unregulated trading facility. 

WHAT IS THE DIFFERENCE BETWEEN DEALING IN OFEX AND AIM SHARES? 

None.  Investors should deal through a stockbroker.  The broker will issue a contract note and agree a settlement date which can be anywhere between five and 25 days (T+5 - T+25).  As part of the monitoring process all transactions are reported via Stock Exchange systems and are seen by JPJ's regulatory body, the SFA.  Furthermore, all prices are sent to the Inland Revenue Share Valuation Division periodically and upon request. 

GENERAL REQUIREMENTS FOR ENTRY 

If the company is established, signed sets of the last 3 years' Report & Accounts are required.  The latest set must be unqualified. 

If the company is a "start up", fully qualified projections in a business plan must be produced by a recognised adviser.  Any other supporting documentation, ie contracts or licences covering products must also be made available. 

All documentation must be submitted by the company's advisers, ie a member of a recognised professional body. 

The company must pay an application fee of £250.00 plus VAT. 

SPECIFIC REQUIREMENTS FOR ENTRY 

If the company has a restrictive register, it will not be accepted on OFEX, as the shares must be freely transferable. 

OFEX can however, in the short term, accept an undertaking attached to the Articles of Association until such a time as the clause is removed with the formal approval of the shareholders. 
 
Any prospectus covering a public fund raising must be to the standard required under the Public Offer of Securities Regulations 1995. 

The Board of Directors must be fit and proper persons. 

All the information supplied will be reviewed by a panel of professional advisers, comprising accountants, lawyers and fund managers.  Separate searches are made via Companies House and the Securities and Futures Authority Ltd to establish the suitability of all the directors and their advisers. 

NEWSTRACK'S ROLE 

Newstrack was established in October 1993 to provide a source of easily accessible company news and financial data to meet the needs of investors who require more information on unquoted securities. 

The launch of the Alternative Investment Market (AIM), OFEX and Venture Capital Trusts, has highlighted the growing importance and awareness of unquoted securities.  Newstrack is the leading screen based source of information in this specialist area of the market. 

Newstrack's information is freely available in every major equity dealing room in the UK.  The service, on line 24 hours a day, seven days a week and 365 days a year on over 400,000 information terminals worldwide via ADP (QSTLine), Bloomberg, ICV-Topic3 and Reuters. 

The provision of more information will stimulate additional trading activity in the shares of unquoted securities. 

The Newstrack service is designed to be equally effective for both AIM and OFEX companies.  Newstrack enhances the Stock Exchange SEATS Plus trading screen information and the Stock Exchange Regulatory News Service (RNS) by providing a much wider range of additional statistical information and greater visibility for company announcements. 

Newstrack also enhances the visibility of the announcements which all companies make through the RNS.  Due to the huge volume of announcements made everyday, retrieving an announcement after the first day of publication becomes increasingly difficult.  The Newstrack service allows for the company's announcement to be clearly visible (alongside the company's financial data and profile) until it is replaced by the next announcement.  When this happens the announcement's headline is transferred to a separate page of the service and remains to build a useful historical overview. 
 

COMPANY INFORMATION 

Provision is made for each company to have a detailed profile which gives a clear picture of the company's history and current activities plus any major recent events such as acquisitions or other restructuring of the company since its year end. 

The number of new companies joining OFEX and AIM is forecast to grow rapidly over the next two years (there were over 800 companies on the USM at its height).  It is therefore vitally important that the constituents of OFEX and AIM create a visible profile to avoid being overlooked in the crowd. 

OFEX and AIM have attracted a good deal of attention which has helped provide a strong launch pad for many of the companies joining. The truly successful companies will be those that recognise the value of a consistent level of easily accessible information - the service that Newstrack provides. 

VISIBILITY 

OFEX companies will have exactly the same level of information displayed as AIM companies, with particular reference being drawn to the company announcement part of the service. 

As the shares of OFEX companies are traded outside of the London Stock Exchange they cannot use the RNS.  Newstrack however provides a very similar RNS styled service and will handle as many announcements as companies wish to make.  Announcements can be sent to Newstrack by fax, letter or E-Mail, and be securely embargoed until the required time of release.  All announcements are published simultaneously to the four major news vendors. 

Newstrack provides a central focus for information on OFEX securities which ensures that market professionals are fully advised at all times of transactions and information about the companies. 

To assist private investors, who typically do not have access to the Newstrack Information, OFEX has a weekly box in the Financial Times (every Saturday) which lists mid prices and other information on OFEX companies. 

OFEX AS A FEEDER MARKET 

OFEX is not a competitor to the Alternative Investment Market because it is not a market. 

OFEX was principally designed to cater for those companies on a matched bargain basis whose shares were previously traded under Stock Exchange Rule 4.2, but: 

Companies can, and have, raised small amounts of money, typically between £250,000 - £1,500,000.  It may not be cost effective to do this on AIM. 

OFEX has a lower profile than AIM. 

OFEX gives the companies a stable period for re-organisation, in order to "get in shape" for AIM or the Full List whilst at the same time establishing a share price. 

OFEX provides a way for venture capitalists to get in and out of smaller companies - a way of re-marketing large individual shareholdings. 

OFEX will be transitional for some companies; three OFEX companies have successfully transferred to AIM in the last three months. 

COSTS 

The annual cost for an OFEX trading facility, which includes all news and price dissemination by Newstrack and the services of a market maker, is £3,500 plus VAT. 

The fee does not include the Financial Times arrangement, which currently costs £440 per annum plus VAT for a line in the OFEX box every Saturday.