On 17 December the Exchange's board decided not to publish a report by its Smaller Companies Working Party that called for the USM to be replaced by what it called an Enterprise Market. This would allow trading in shares of smaller companies under less rigorous regulation than applies in the main market.
Instead, the board called for more market research to gauge public support for such a market. The USM is due to die in 1996, after European Union rules in effect eliminate distinctions between it and the official list.
Next Friday, the working party, which includes Exchange officials and representatives of interest groups, is due to meet to decide what to do next.
'It will be a free and open discussion,' said Geoffrey Maddrell, chief executive of ProShare, the small investors' body.
Ronald Cohen, a member of the working party and chairman of Apax Partners, the venture capital group that brought Virtuality to market in 1993, wants the venture capital industry to go it alone with its own market that would link London, Paris and Frankfurt.
''I don't see why we need more market research,' said Mr Cohen. 'The working party has already spent eight months researching this, and British Venture Capital Association research shows there would be very great interest in it. It's like a new motorway: beforehand some say yes, some say no, but as soon as it opens it's jam- packed. In my view, the Exchange is refusing to accept a very obvious conclusion.'
Mr Cohen wants the new Europe-wide market to cater for what he described as 'entrepreneurial growth companies', where the management has a big share stake and at least pounds 1m of shares can be released on to the market.
He revealed that he had been talking quietly for the past year with the London office of Nasdaq, the American over- the-counter stock market operator, about running a breakaway market if the Stock Exchange got cold feet. Mr Cohen promises to revive those discussions as soon as he returns from holiday in Israel.
The London Exchange has always fiercely resisted any attempt at what it regards as fragmentation of securities trading in this country. Other members of the working party are desperately trying to hold the ring and still hope to keep the Exchange involved in any new project.
Mr Maddrell said: 'I feel we have got to work further with the Exchange. The critical issues are how much protection there is going to be in the new market, and how it should be managed. But a Nasdaq-run market is certainly an option.'
Mr Cohen wants his plan for a pan-European market for high-growth companies to be led by the European Venture Capital Association, whose present chairman is John Singer of Advent International, a London-based investment house. But he was reluctant last week to push the button for a do-it-yourself stock market.