There is something of a history behind the Stock Exchange's high-handed decision both to threaten ShareLink, the private client stockbroker, with disciplinary action, and sue the company's chief executive, David Jones, for defamation. Mr Jones has been warning the Exchange for years that it needed to develop alternative market systems to complement the quote- driven system favoured by the big institutions. It also needed to do more to support the retail market, he argued. If the Exchange didn't do something, he warned, then somebody else would. That competition is now on its way, most seriously in the form of Tradepoint, a rival exchange due to open next week.
Mr Jones's warnings were and are not those of a fringe player. A few years ago, as the representative of Britain's largest retail stockbroker, he sat on the Exchange's council, to which he returned for a second spell last spring. This second bite at the cherry, by all accounts, was as disappointing for him as his first, lasting only six months. He left disillusioned, convinced that nothing had, or ever would, change.
Against this history of friction, the Exchange's present action is at least understandable. But it is also silly and smacks of desperation. Instead of embracing new technology for the sake of the London market, it appears bent on using its rule book to clamp down on competition. It has taken on the accoutrements of all monopolies; its approach is to stamp out the competition rather than outdo it. Michael Lawrence, the chief executive, would be well advised to concentrate on carving out a genuine new role for the Exchange in a fast-changing-world - it certainly needs one if it is to survive - rather than spending its memberships' money on fighting diversionary legal battles.