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Are Stock Exchanges Failing?

This is the question for today? Economic strife and Government austerity measures have almost entirely stifled growth and with the Euro under threat and countries across the European Union suffering massive loss of living standards what can be done to stem the tide and begin the long road back to prosperity?

I can’t help thinking about why Stock Exchanges were created and how far removed they are today from the original. The reasons we had Stock Exchanges was to raise capital for companies to invest and reinvest in their business, occasionally takeovers, but mainly allowing investors to buy into good companies with good prospects making profits and paying dividends. In fact investment in every sense of the word that fuelled growth and the economy. How we could do with that today.

What we have today are Stock Exchanges built for speed and the trader or gambler. So far removed from investing and so far removed from the needs of todays need for growth. The number of new listings and new issues is lamentably low and it’s not just the economic situation that’s causing this.

Far too much investing is via private equity and off exchange. Why? Surely the Stock Exchanges should be looking at capturing more investors and attracting more company listings and more capital raising deals. Even if this means establishing a new Stock Exchange based on traditional structures where speed and electronic wizardry are not the prime requirements but where trading is via own capital (We called this Jobbing pre 1986) and brokers are not compromised by self-interest.

Is it feasible to rebuild the old Stock Exchange with exclusive entry to those that fit a Jobbing and Broking profile re 1985? Could this retro model Exchange actually attract business and investment into new companies and be the ground for growth?

It’s a fanciful notion but I think if there was enough interest a Retro Stock Exchange could be built and save the nation from a black and austere future with growth and hope.


Comments: (4)

A Finextra member
A Finextra member 22 June, 2012, 08:24Be the first to give this comment the thumbs up 0 likes

A very thoughful contribution indeed ! And also, a good description about where too much deregulation has brought us to.

Financial services have an important role: To *serve* the real world economy. It is of course okay to make profit from providing such services - but FSI should not *rule* the real world economy.

Putting that wishful thinking into reality would also lead to a more "retro" role of stock exchanges.

Gary Wright
Gary Wright 22 June, 2012, 09:32Be the first to give this comment the thumbs up 0 likes

Thanks Gerhard, in these difficult times i think its easy to try and build new structures and introduce new rules and laws when the past might hold some anwsers. The Stock Exchanges and MTFs, dark pools and so on are new manifestations that all have their own values. So i am not saying stop or prevent innovations such as HFT but i building these new technology innovations we are leaving out traditional investment and the need for small companies to grow and become large. When i hear very wealthy and succesful entenprenours say they will not go for listing on Stock Exchanges i have to question the ability of the financial markets to provide the fundementals they were originally created for 

Nick Collin
Nick Collin - Collin Consulting Ltd - London 22 June, 2012, 18:47Be the first to give this comment the thumbs up 0 likes

Yes - excellent post Gary!  I never thought about stock exchanges this way.  Thanks.

Gary Wright
Gary Wright 22 June, 2012, 19:06Be the first to give this comment the thumbs up 0 likes

Thanks Nick for your kind comment and i will return to this topic in the future

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