THE Stock Exchange has formally approved a Developing Companies Market and is aiming to have shares in up to 10 small to medium sized companies listed by the end of the year.

The new market - which has been under consideration for over a year - was given its essential stimulus last week when the Budget included a provision which will allow BES companies take a listing on the new market without losing their BES status.

The Budget provision to increase tax allowances on Special Portfolio Investment Accounts from £75,000 to £85,000, if the money is invested in DCM companies, was another factor which lead the board of the Stock Exchange to give approval for the DCM yesterday.

The Stock Exchange's chief executive, Mr Tom Healy, said the DCM is now open for business and added: "If we get eight to 10 companies on the market by the end of 1997, that would be very satisfactory." He hoped that Irish companies currently thinking of taking a listing on the AIM market in London might now reconsider and look to the DCM as an alternative.

A survey by KPMG Corporate Finance last year indicated strong interest in the DCM as long as the tax treatment of investment in the market through SPIAs was defined and BES companies were included. Those issues have now been taken care of in the Budget, with BES companies on the new market being effectively treated as unlisted companies and retaining their beneficial tax status.

That KPMG survey indicated that 20 small to medium sized companies would be very interested in pursuing the DCM option. The calibre of those 20 companies is very high, said KPMG at the time, adding that the typical profile of a company seeking a DCM listing would be one with an established track record, achieving now or in the near future profits of over £1 million and employing over 100 people. The minimum trading record for the DCM will be one year and the typical company would have a market capitalisation of between £5 million and £20 million, but the minimum size will be dictated by the investors.

Mr Healy added that, in developing its plans for the DCM, the exchange had not assumed strong support from institutional investors. "We were, more keen to get the SPIA situation sorted out but, if companies are attractive, then, there will probably be some institutional interest."