In the wake of Michael Lawrence’s summary execution at the Stock Exchange last week, an unnatural amount of City gossip concentrated on the vulgar and personal. Dandruff and halitosis cropped up unpleasantly often in normally genteel parlours.
This does, of course, say a good deal more about the City well-to-do than it does about Lawrence. Nothing can compare with the City’s great and the good when they have decided to dump a hired hand.
After a City figure falls from grace, especially one from the wrong side of the tracks, there is a degree of historical revisionism that would put the old Stasi to shame. Look at the treatment meted out to Nick Leeson when he blew it at Barings. We were practically led to believe that Leeson had plotted the bank’s downfall since his school days, as he pulled the wings off butterflies under the influence of proscribed narcotics.
So we should not, perhaps, take the character demolition of Lawrence too seriously. Certainly, he was a bad communicator – he is widely credited as claiming that he “can speak quicker than most people think”. Quite. And he attempted to bulldoze radical reforms through the securities markets with scant regard for the powerful market-making enemies he was making. So they shot him.
Does any of this matter much to us in the real world? Well, it should. Not only is the Stock Exchange the financial engine that drives vital capital-raising for British business. Not only are shares no more nor less than products that must be marketed effectively in order to fetch the best price. Not only is the London Stock Exchange the primary instrument through which we manage our financial services industry.
Additionally the post of its chief executive is today a marketing role. It does not matter whether the position is held by an in-bred toff from one of the blue-blooded institutions, by one of their patronised grammar school oiks (the role in which Lawrence was cast), or by some parvenu from one of the newer and more global City players. So long as he (or she – just imagine) is recognised as someone who can identify fresh markets and sell British securities talents successfully into them.
This pre-supposes that we have such talents to sell. Well, again, we should have. There is, for starters, the Alternative Investment Market (AIM) for smaller to medium-sized enterprises seeking a stock market listing. It is an intelligent replacement for the old Unlisted Securities Market (USM), which turned out to be little more than a vehicle for heavily ramped stocks of the Thatcher revolution.
Then there is rolling settlement, which replaced the archaic accounting periods at the Exchange, allowing the settlement of share transactions to occur naturally rather than at some arbitrary time prescribed by the burghers of the Exchange.
There is Crest, the technology that makes all this possible and which replaced Taurus, the discredited system that did for Lawrence’s predecessor, Peter Rawlins. There is Tradepoint, an alternative and competitive trading vehicle for the institutional market. There is trading in real-time stocks on the Internet. And there is Sequence VI, the new and improved version of SEAQ, the electronic quotations system.
Overriding all these London Stock Exchange initiatives is the move towards an order driven, rather than a market-maker dominated, stock market. Powerful old market-makers don’t like that. Thus they demanded – and got – Lawrence’s head on a plate. But the move to an order-driven market, albeit sitting alongside the traditional market-makers, is inevitable, even had Lawrence never been born.
Lawrence could have managed more sensitively some of these items of agenda. In particular, the manner in which the Bank of England was alienated over Crest (it is, perhaps, unremarkable that the Stock Exchange’s new deputy chairman comes from the Bank) and the unseemly and monopolistic way in which Internet dealing was resisted must count substantially against him.
But the London market is in good shape despite – and, in some cases, because of – all this. We have better liquidity than anywhere else in Europe, we have a better regulated market than the likes of France and Italy (and are better structured than the arcane German market). We offer access to capital markets for smaller companies that is the envy of many countries and we are in the vanguard of settlement systems.
This all calls for a chief executive who talks to other European exchanges, who seeks to sell this expertise abroad. Sadly, the old guard who did for Lawrence are isolationist Little Englanders who believe that protectionism is the way to stop the securities business progressively moving to Frankfurt.
But the Stock Exchange needs someone in charge who can put it at the heart of Europe, who can develop and sell what is the best of London to the advantage of Europe as a pan-national trading centre with the US and the Far-East. It needs someone who recognises the saleability of London and who can use the strengths of its brand to dominate other markets. And if that’s not a marketing role, I don’t know what is.