City: Back to basics after the Taurus goring

Click to follow
The Independent Online
THE London Stock Exchange has always thought of itself as much more than the club it has become. Like many of Britain's long-established institutions, it hangs precariously on to a tradition and past that seems to have little or nothing to do with its limited present-day function and purpose - in essence, reduced to that of surveillance, collator of information and provider of dealing and related services to the broking houses and market makers that operate under its umbrella.

Virtually all its disciplinary and regulatory functions have been taken away. Yet many of those who work there still seem to believe they are more important and know better than the member firms they are meant to serve and represent.

Its glory days long since past, the Stock Exchange is in truth a sad, dilapidated and chaotic relic of an organisation.

To understand the Taurus fiasco, you have first to appreciate this unhappy backdrop. It helps explain, though not excuse, why the Stock Exchange pursued its grand folly for so long.

For years, it has desperately been searching for a new role commensurate with its once-powerful past. The development of information and computer services like Taurus - activities that surely would have been far better pursued and executed by more commercially orientated organisations - is part of that process.

The London stock market desperately needs a computerised settlement system to replace its antiquated and costly paper-pushing ways, and the Exchange was determined to reinvent the wheel in providing it.

As long ago as 1989, the ruling elite of the Stock Exchange was warned that the path it was pursuing was foolhardy and misguided. Something was seriously wrong and a radical rethink was required, many leading practitioners told it privately.

But as one deadline after another was broken and costs soared through the roof, nobody wanted to listen, still less admit to it.

Nor was it simply a case of 'delusion', as the Stock Exchange's chairman, Andrew Hugh Smith, insists. It was also self-interest. Too many jobs, too many salaries, too much pride became wrapped up in the project - not least that of Peter Rawlins, the chief executive, who seemed by the end to think the Stock Exchange would one day run the universe. He used to talk in all seriousness of the Exchange becoming a profit-making company with its own stock market quote.

Taurus, however, was not a problem entirely of the Stock Exchange's making. From the start, the main difficulty with the system was trying to represent too many vested interests.

Taurus attempted to be all things to all men, to accommodate every desire and anomaly, every quirk and way of doing things. As a consequence, agreement was hard to achieve on anything. It became a conceptual nightmare, wracked with legal and programming problems of almost insurmountable complexity.

What future for the Stock Exchange now? Its failure to deliver a reliable electronic settlement system is a costly letdown for the City and a deeply shaming thing. Clearly, the Exchange will have to redefine its aims and purpose at its next board meeting.

It is going to have to accept a much more limited and less ambitious role in the City. Of course, it must be in a position to pursue its proper function of ensuring that anyone who wants to buy and sell shares can do so, but running systems to make that possible is an activity much better suited to the practitioners and IT specialists.

What is likely to emerge is a hybrid of different systems - one system to fit one set of needs and another for a different set of needs, much of it bought in off the peg from abroad - rather than the great tailor-made monolith that Taurus set out to be. To make even this second-best solution work, however, the City must be prepared to go back to basics and greatly simplify and redefine its settlement needs and aspirations. Even the best computer brains in the world, equipped with an unlimited budget, would have had difficulty satisfying the sort of demands being made of Taurus.

Comments