Lunching in a brasserie in the Galerie de la Reine in Brussels reminded me of an incontrovertible fact: beer brewed by Trappist monks does not induce silence – at least not at first. I was trying to talk about progress with the development of a pan-European system for securities trading. But the conversations going on at tables all around me rose in volume as the brothers’ lethal brew or other equally potent beverages did their work. As a result, rational discussion was proving increasingly difficult to sustain.
On the other hand, it might have been that the subject itself was impossible to discuss rationally. Attempts to reach an agreement embracing the widely varying interests of exchanges across Europe were bound to result in compromise. What was emerging from the EC might succeed in reconciling the irreconcilable, but there would undoubtedly be losers. And the main losers looked like being those companies whose primary listing was on a European exchange. Bureaucrats always end up designing camels; and even the best camel is bound to lose when matched against a horse bred for competition.Although the person sharing my table worked somewhere in the EC, the word bureaucrat scarcely gives the right impression of her. Maria was in her late 20s. She was the product of one of those European business schools which turn out multi-lingual, multi-cultural graduates who combined fierce intelligence with frightening incisiveness. She was dressed in the understated Eurochic favoured by her peers of both sexes. Like them, she would fit in everywhere and stand out anywhere.
One way she stood out was in her eating habits. While around us people were demolishing vast plates of mussels and eels, venison and rabbit, with piles of frites on the side, she asked for a salade tide. Her authority was such that the waiter accepted her order without demur.
Early in the meal, while it was still possible to make oneself heard, Maria was explaining how the Commission had originally sought to create a Europe-wide trading system based on national exchanges. But the differences among them were too great. It proved impossible to unify quote-driven markets with order-driven ones, or those which traded continuously with those which auctioned stocks once a day. Everyone was in favour of a single system, but only if theirs was the model which all the others followed.
The EC’s worthy objective was to set a regulatory framework under which markets with totally different trading systems could exist and compete. It seemed that in Europe, however, existence was more important than competition. Having one’s own airline, for instance, was a point of national pride – even if it lost a fortune. So was having a stock exchange, even if it added significantly to the costs for issuers and investors.
When Seaq International first came on the scene, trading in Europe’s most attractive securities began to migrate to London because it offered investors a more efficient service. The exchanges which lost out were forced to modernise themselves in order to compete.
But that didn’t mean they accepted competition as a good thing. Within the EU, much is said about creating a market in which goods and services can flow freely across state boundaries. But, at the same time, a great deal of ingenuity which might be better spent elsewhere, goes into efforts to protect national interests. So the Italians have found a way to restrict the ability of non-Italian securities houses from competing with domestic players. The Germans have restricted the extent to which their institutions can invest abroad. And the French have argued that London wasn’t a regulated market because its market-making system meant deal prices and volumes weren’t disclosed immediately. The fact that costs were lower and the market more liquid seemed not to matter.
Maria began to explain what she and her colleagues within the Commission were doing to tackle these problems but by now the noise level in the fin-de-sicle dining room was such that it was almost impossible to hear what she was saying. All I picked up above the raised voices was the occasional phrase like single passport, mutual recognition of rules, harmonisation of minimum standards and the concentration principle – the arcane concepts through which Europe seeks to make progress.
I reflected that it was perhaps typical of Europe that it should be hard for reason to make itself heard above so many competing voices. And typical of Europe’s problems that so many of its best brains should be engaged in arbitrating between vested interests.
I wanted to suggest that Europe might look to the US as a model. After all, the SEC provided an umbrella under which markets as diverse as the NYSE and Nasdaq could operate. But by now the noise was making conversation impossible.
So I took a sip of my beer and lapsed into silence. The Trappists had had their effect.
