To hear one allusion to The Importance of Being Earnest can be amusing; to hear a dozen feels like tedium. Yet after the London Stock Exchange found itself without a chief executive for the second time in three years, almost everyone in the City with literary pretensions was citing Lady Bracknell.
So it was no surprise that Jeremy said: ‘To lose two might seem like carelessness,’ when I raised the abrupt firing of the London exchange’s CEO Michael Lawrence with him. ‘But there were very good reasons,’ he went on. ‘Like the big market makers objecting to the introduction of order-driven trading,’ I suggested. ‘Not at all,’ Jeremy retorted. ‘The exchange is fully committed to reform. It wasn’t a question of policy; more one of style.’
What he seemed to be suggesting was that an accountant who was grammar school educated and who had never worked in banking or broking wasn’t what he would call ‘one of us.’ It is slightly odd that, although most of the established City firms like Jeremy’s are now owned by the Germans or the Dutch or the Swiss, the old school tie still matters.
Jeremy was definitely one of them, from his Savile Row suit to his effortless air of superiority. His credentials were enhanced by the confident gaze of long dead members of his family who stared down from gilt-framed portraits on the oak-panelled walls.
We were seated at one end of a long, highly-polished boardroom table. Around it a hundred or more years ago, Jeremy’s predecessors had planned the flotations of South American railway and South African mining companies. The room resonated with the confidence of times past when the exchange had been a cosy club of brokers and jobbers who made huge fortunes with hardly any commitment of capital.
The world had moved on – and so had the room. With Big Bang, Jeremy’s family brokerage had merged with an old established merchant bank and a leading firm of jobbers to form a new integrated securities house. They had moved into a brand new ‘smart’ building which could accommodate the technology needed to survive in the modern world.
But before the move, the partner’s room from the old offices had been carefully dismantled. The panelling, furniture and pictures had been reassembled with loving care on the top floor of the new building. If you looked carefully, you could see the discreet modifications which had been made to house the air conditioning ducts. The only thing to remind you that the express elevator was not a time machine were the disproportionately large plate-glass windows. Through them one looked down onto now defunct docks. Those docks had once made London the world’s busiest port, but the determination of those who worked there to defend what they saw as their interests had led to the loss of trade to Rotterdam and elsewhere.
‘The exchange is firmly committed to providing the most efficient trading environment,’ Jeremy went on. ‘But bringing about change calls for diplomacy and consensus.’
‘Or a crisis,’ I thought to myself, wondering how far the commitment to order-driven trading was brought about by the setting up of a rival system and the losing of London business to exchanges on the Continent. Instead I asked: ‘So what happens next?’
‘Well, the exchange will be issuing a consultation document on share trading reforms next week,’ Jeremy replied. ‘And the steering committee which will see through the reforms has been strengthened.’
‘By adding more market makers who will want to protect their own positions,’ I suggested. ‘Not necessarily,’ came the answer. ‘Order-driven trading is already well established in the City. Already, 17 per cent of market value is traded through inter-dealer brokers’ order books and 30 per cent of all trading is automated through member firms’ proprietary networks. So we’re not dealing with new concepts here; only with how change is managed. And the exchange has been quite good at managing change – look at Big Bang.’
‘Well, up to a point,’ I thought. By controlling the dissemination of market information through Seaq and running the settlements system, the exchange had benefited from the explosion of equity trading in the late 1980s. And it had gained from the way recapitalised London-based securities houses had attracted business away from Europe’s bourses.
But that business was starting to ebb away. The introduction of a modern settlements system was now being led by the Bank of England – following the failure of the exchange’s own efforts, which had been the cause of the loss of its last chief executive. The exchange had lost its regulatory role to an independent Securities and Investment Board. It no longer had exclusive rights over information. And what had the exchange been doing – except trying unsuccessfully to stifle any competition which might affect its members?
‘Well, perhaps recent events haven’t been consistently well-handled,’ Jeremy admitted. ‘But we learn from experience.’
My thoughts turned back to Oscar Wilde. Didn’t he say that experience is the name everyone gives to their mistakes?
