It was 20 years ago today,’ Paul McCartney remarked as he introduced Sergeant Pepper’s Lonely Hearts Club Band at Live8 – and so it was for the last Big Bang, which many will recall hitting the London stock market back in 1986. Twenty years on and we are in the process of going through a series of stock exchange booms the likes of which we have never seen before. What the aftermath will be we cannot yet tell, but things will never be the same again.
In 1945 the UK had 45 stock exchanges, and the following 40 years saw a dramatic period of consolidation that eventually formed the single LSE we see today. Now we are about to see another fundamental change to the main London exchange, in terms not just of size but also international breadth and ownership.
It appears that we are moving inexorably toward an eventual ‘globex’ where stocks will be continuously traded on a single exchange around the world. For the moment, however,we are still at the early stages of these international tie-ups and transfers of ownership. Euronext has led the way as a combined Amsterdam, Brussels and Paris market, most recently adding Lisbon to the portfolio, but it is the potential takeover of the LSE that will be the most significant catalyst for the next round of changes.
It seems as though the NYSE will try to affirm its marriage to Euronext, although a certain German suitor has yet to give up. And Nasdaq, with its 25 percent holding of the LSE, will in due course probably look to force the vows of its ‘shotgun’ partner after its surprise share purchase a few months back.
The American way
While some might enjoy this game of corporate charades, the implications of such changes are potentially very serious. One of the United States’main exports is an astonishing ability to ship abroad many of its controls, including regulation, taxation and a somewhat protectionist attitude against things that aren’t ‘red, white and blue’. The SEC has a fearsome reputation as a regulator and as a strict prescriber of corporate and investment behavior; compare this to the more thematic approach of the UK’s Financial Services Authority.
Despite pleadings to the contrary, we should be concerned that such an attitude to compliance is not exported to replace the UK’s more ‘common law’ approach. Additionally, the issues surrounding the astonishing restrictions of Sarbanes- Oxley regulations may also start to find themselves seeping across the Atlantic.
All these changes could have profound implications for IR. As exchanges extend their global reach and operational time-span, IROs will probably have to do the same. The effects, both on working hours and regulation, will be confusing and thoroughly exhausting – so much so that I wonder how many IR professionals will be sitting late into the night nursing their charges, very much part of a ‘band of lonely hearts’.
Justin Urquhart Stewart is marketing director for Seven Investment Management.
