No Pain No Gain: Fringe market move opens brave new world for the share-buyers

Buying shares in share markets could become a fascinating pastime. Soon it should be possible to buy shares in Ofex, the fringe share market set up by the old-time jobber John Jenkins. Seymour Pierce, the stockbroker, is preparing a flotation that should lead to the shares being traded, surprisingly not on Ofex, but on the London Stock Exchange's junior Alternative Investment Market.

The AIM arrival of Ofex will mean investors can buy shares in the three main markets. Shares of the dominant London Stock Exchange (LSE), embracing AIM, have been fully quoted for two years and Share, owner of the youngest and smallest of the three, has been traded since 2000.

Ofex emerged in the mid-Nineties when the LSE decided to close its matched- bargains facility. Despite trying to cater for what was known as the twilight market the LSE was never at ease with the lightly regulated matched-bargains operation, where buyers and sellers are brought together when they want to deal at the same, or matched, price. Mr Jenkins, whose father created a successful business jobbing in out-of-the-way shares, launched Ofex to accommodate the array of shares the LSE so shamefully abandoned.

There is no doubt, despite mutterings of discontent in some quarters, Ofex has been a success and fulfilled a useful investment need. It provides a cash-raising platform for small companies, and offers share-dealing facilities for bigger groups which, for a variety of reasons, do not want an LSE presence. The soccer Premiership's front-runners, Arsenal, the nation's oldest brewer, Shepherd Neame, and the breakfast cereal-maker Weetabix are among the long- established Ofex constituents which graduated from the abandoned twilight zone.

Share has opted to use its own stock market, ShareMark, for trading in its own shares. They are 14p, which puts them on an undemanding earnings multiple. Share is among nine shares traded on ShareMark which, although the smallest and youngest of the three, is in some ways the most technically advanced.

It is, in effect, an internet auction market. Buyers and sellers are matched and there is no dealing spread. Share was the first share traded when ShareMark was launched in 2000. Last year, Gavin Oldham, Share's chief executive, decided to recruit other companies. Constituents now include Broker Direct, an insurance business, and Luke Hughes, a furniture-maker. A medical group, Eyebright, is trying to raise £2m and should arrive in weeks. Three or four other groups are talking to ShareMark about joining. Two of the existing constituents, RingProp, a marine engineer, and Jetcam International, involved in metal fabrication, are also traded on AIM.

Nearly five million shares, involving more than 6,000 deals, have been traded in ShareMark's short life. The group was born as The Share Centre, a stockbroker offering a range of financial services. It is a member of the LSE and administers more than 225,000 accounts, Peps, Isas and share incentive plans worth £600m.

Mr Oldham is also a former jobber. He was a partner in Wedd Durlacher, the leading jobbing firm before the 1986 Big Bang changes ended the system that had prevailed for more than 200 years, whereby member firms had to be either brokers or jobbers, today's market-makers. Wedd was acquired by Barclays in the golden scramble as big banks, domestic and overseas, paid fancy prices to become major stock market players in the brave new world of electronic dealing. Most subsequently regretted their largesse.

In 1990, Mr Oldham left Barclays to set up The Share Centre. With his family, he has 80 per cent of the capital. Directors and staff account for 10 per cent, with outsiders, mainly customers, taking the remaining 10 per cent. Last year group profits fell from £1.85m to £1.2m. Even so, it was a splendid performance. After all, in last year's bleak climate it was an achievement for a financial group such as Share to stay in the black. Many did not.

The profit included £568,000 from sales of LSE shares, which netted Share £300,000. It still owns 800,000 shares. The balance sheet is strong, with more than £5m in cash and investments, including the LSE stake, valued at £3.5m.

Consolidation seems to be the buzz in the stockbroking community. Barclays recently acquired the European operations of Charles Schwab. Share, I suspect, is looking for suitable buys. It has already flexed its corporate muscles, acquiring the internet broker Stock Academy last year. A merger with a rival is always a possibility but I would expect him to try to retain his independence. Clearly he wants to make Share, based at Aylesbury, Buckinghamshire, a powerful force.

Ofex, under the guidance of Mr Jenkins, has felt a desire to go upmarket to AIM in its quest for growth. It would not be surprising if Mr Oldham eventually seeks a full LSE listing (like the Stock Exchange's own shares) or a presence beside Ofex on AIM.