How the demands of large investors are squeezing out private players

STOCK MARKET WEEK

Brian Winterflood, one of the most experienced and respected jobbers, sounds a note of warning about the way the stock market is evolving.

He declares: "The policy makers in the [Stock Exchange] Tower have to look beyond the desires of the international set, who now, in the main, own our financial companies and merchant banks.

"They want - and have managed - to change the system to suit themselves and turn it into a wholesale market that will allow them to satisfy their in-house trade, take out risk and abrogate their responsibilities to the retail market."

Mr Winterflood, who runs Winterflood Securities, reflects the anxiety of many private investors who resent the stranglehold of the Crest computerised settlement system and the way they are squeezed to satisfy the demands of the large investment houses.

There is a justifiable desire to keep the market at the forefront of the international investment community. But in the rush to accommodate the big houses the needs of the small investor have been largely ignored. As one market personality observed: "The Stock Exchange just plays lip service to the need to encourage private investors; it doesn't really care about them."

With many investors herded into nominee accounts, often charged more if they want share certificates and threatened with fines if they cannot meet the increasingly tight settlement deadlines, there has been little, if any, attempt to improve the lot of the small player since Big Bang 11 years ago.

The small shareholder, however, is an important part of the market and the lifeblood of many smaller, private client stockbrokers.

The arrival of order-driven trading in October is another development not designed to help small companies or indeed small investors.

One question is whether order-driven, as opposed to price-driven, trading should be adopted for all companies.

Initially it will be confined to Footsie stocks with the FTSE 250 constituents embraced soon afterwards. Whether the rest will follow is the subject of anxious debate. Current Stock Exchange thinking would appear to favour order-driven trading being confined to the top 350 shares.

Mr Winterflood, whose speciality is smaller companies, fervently hopes the rest of the market will not be dragged into the new order. "Anything below the indices should remain price driven," he says.

The market, he adds, has "a plethora of small companies, and for that matter not so small, which do not have a great deal of free equity available to provide the necessary liquidity. We need to remember the vast majority of our companies are more akin to the corner store than the supermarket.

"Our price-driven system helps to correct that situation by having risk takers - market-makers who provide firm twoway prices in reasonable amounts of stock to allow real-time trading for all and give institutions the ability to value their portfolios.

"Immediacy of trading is, I suspect, very important to private investors and institutions."

He is in the forefront of the campaign to split listed shares into three categories - a big board embracing the top 350; then a market for the next 1,750 with AIM continuing its present function. "These sectors to be governed separately with necessary adjustments to rules and regulations and, hopefully, tax breaks," he suggests.

Mr Winterflood, whose market-making company is part of the Close Brothers investment group, says: "We must be careful we don't lose what has taken so long to create - that is a market for smaller companies to find seed capital, not to be held hostage by the banks. These smaller businesses are frightfully important for our economy. The way we raise and trade smaller companies is the envy of Europe and I suspect many other markets around the world."

Last week's equities performance was remarkable for the continuing revival in the supporting shares and Footsie's Friday collapse. The FTSE 250 index and FTSE Small-Cap index made headway. Their comeback was in sharp contrast to the indifferent display by Footsie, which weakened 166.1 points over the week.

The supporting players still have a long way to go to equal their Footsie peers. But their performance in the past two weeks suggests institutional investors have decided real bargains now exist on the under card.

Financials could still be the key to Footsie's behaviour. If they crack - and many gave ground last week - Footsie would be hard-pressed to retain momentum, the astonishing bull run would be over and, perhaps, so would the supporting stocks' revival. Still, despite its retreat, Footsie is only back to its level of three weeks ago.

With the holiday season in full swing the flow of company results is down to a trickle.

Still, this week's list includes two Footsie constituents - Halifax and Rentokil Initial.

It will be the first time Halifax has graced the market's profits schedule. Its interim figures on Thursday are the first since its flotation. Surprises are not expected. James Johnson at Credit Lyonnais Laing is looking for pounds 756m against last time's pounds 649m. Former members who kept their shares are unlikely to receive any interim dividend.

Rentokil has to contend with its self-inflicted 20 per cent earnings growth target.

Although chairman Sir Clive Thompson must regret his rashness in committing himself to such an objective he should have little trouble with Wednesday's interim figures.

They will include many of the earnings-enhancing benefits of the BET acquisition. Paul Morland and Andrew Nussey at NatWest Securities expect profits to be 47 per cent higher at pounds 198m but suggest there may be problems meeting the earnings target over the full year.

Argos, the catalogue stores chain, chips in with interim figures today. It has warned they will be lower. The market is looking for pounds 27.5m, down from pounds 31.8m. Monument Oil & Gas on Friday should manage interim earnings of pounds 7.5m, up 10 per cent.

Suggested Topics
News
news

Emergency call 'started off dumb, but got pretty serious'

News
people

Britain First criticised for using actress's memory to draw attention to their 'hate-filled home page'

Arts and Entertainment
JK Rowling is releasing a new Harry Potter story about Dolores Umbridge
arts + entsJK Rowling to publish new story set in wizard's world for Halloween
News
Russell Brand was in typically combative form during his promotional interview with Newsnight's Evan Davis
people

Thought you'd seen it all after the Jeremy Paxman interview?

PROMOTED VIDEO
Arts and Entertainment
On The Apprentice, “serious” left the room many moons ago and yet still we watch
tv

Greatest mystery about the hit BBC1 show is how it continues to be made at all, writes Grace Dent

Life and Style
tech

Voices
Funds raised from the sale of poppies help the members of the armed forces with financial difficulties
voicesLindsey German: The best way of protecting soldiers is to stop sending them into conflicts
Arts and Entertainment
A scene from David Ayer's 'Fury'
film

"History is violent," says the US Army tank commander Don "Wardaddy" Collier

News
The Edge and his wife, Morleigh Steinberg, at the Academy Awards in 2014
peopleGuitarist faces protests over plan to build mansions in Malibu
Sport
Luis Suarez and Lionel Messi during Barcelona training in August
football

Striker's four-month ban for biting an opponent expires on Friday

News
news
News
ebooksAn unforgettable anthology of contemporary reportage
News
peopleFox presenter gives her less than favourable view of women in politics
News
George Clooney and Amal Alamuddin married in Venice yesterday
peopleAmal and George Clooney 'planning third celebration in England'
Property
One bedroom terraced house for sale, Richmond Avenue, Islington, London N1. On with Winkworths for £275,000.
property
Sport
Erik Lamela celebrates his goal
football

Argentinian scored 'rabona' wonder goal for Tottenham in Europa League – see it here

News
i100
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

IT Systems Business Analyst - Watford - £28k + bonus + benefits

£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

Markit EDM (CADIS) Developer

£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

CTO / Chief Technology Officer

£100 - 125k: Guru Careers: A CTO / Chief Technology Officer is needed to join ...

COO / Chief Operating Officer

Competitive (DOE): Guru Careers: A COO / Chief Operating Officer is needed to ...

Day In a Page

Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

Wilko Johnson, now the bad news

Former Dr Feelgood splits with manager after police investigate assault claims
Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

Mark Udall: The Democrat Senator with a fight on his hands

The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
New discoveries show more contact between far-flung prehistoric humans than had been thought

New discoveries show more contact between far-flung prehistoric humans than had been thought

Evidence found of contact between Easter Islanders and South America
Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

Cerys Matthews on Dylan Thomas

The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
DIY is not fun and we've finally realised this as a nation

Homebase closures: 'DIY is not fun'

Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

Air New Zealand's wizard in-flight video

The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

Pumpkin spice is the flavour of the month

The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
11 best sonic skincare brushes

11 best sonic skincare brushes

Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

Paul Scholes column

I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

While other sports are stalked by corruption, we are an easy target for the critics
Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

Lost in translation: Western monikers

Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

Handy hacks that make life easier

New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

KidZania: It's a small world

The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker