Evolution, rather than another Big Bang

Evolution, rather than another Big Bang

The full folly of Michael Lawrence's crusade for a revolution in the way shares are traded in London has now been exposed. Listening to the bravura performance by the sacked chief executive of the Stock Exchange before the Treasury select committee last week, it appeared that the UK market was crying out for the introduction of the sort of automated trading system which is common in all other international financial centres.

Unfortunately, Mr Lawrence claimed, the necessary process of change was mugged by a couple of macho market makers from BZW and Merrill Lynch (aka Smith New Court) who, seeking to protect their pockets, had the chief executive kicked out.

Well, the market has spoken, but the cacophony of discordant voices making themselves heard in the exchange's consultation programme, made public yesterday, hardly amounts to a tidal wave of sympathy for the Lawrentian cause.

Confusion, perplexity and a kaleidoscope of competing interests emerge - reflecting, only naturally, the huge diversity of needs among the exchange's members and users. Within this range of opinion can be found broad support for change, and for some form of order-driven trading. But it does not amount to the popular mandate for an order-driven revolution of the comprehensiveness Mr Lawrence had envisaged.

Thisis a withering indictment of the exchange's failure to build the case for change, a sad contrast with its conviction that the pressures for reform are widely recognised. The exchange clearly thinks the market making system has had its day. But it protests weakly that it could not go into the world saying so, on the Gerald Ratner principal that if you call your own products crap, shareholders get upset and customers look elsewhere.

Mr Lawrence and friends have been calling the present system names and suffering the consequences. At the same time they have failed to preparethe ground for change. This risks precisely the market fragmentation the Stock Exchange fears most.

However, this is history, as is Mr Lawrence. The Exchange now has to nagivate with a new chart, difficult though it is to interpret on the basis of the survey.

Within this disarray lies an opportunity of sorts, which the exchange must exploit more sensitively than its past attempts at reform. The market consultation does reveal a mandate for change. There will be no Big Bang; evolution is the game, rather than revolution.