With Nasdaq's launch yesterday of a new European stock exchange, backed by some heavy weight ambassadors of the new economy, this seems like more than just a distant prospect. It could soon be a reality and it is hard to see what part the traditional, national players are going to have in it.
Stock markets have historically thrived on being national monopolies. In the past, they have had a monopoly of the new issues and a monopoly of the liquidity, supported by fiercely guarded national rules and regulation. Under pressure from technology and globalisation, this cosy and inefficient state of affairs has long been under threat.
In the City and elsewhere, electronic alternatives to the stock exchange now abound. Perhaps as important, British investors are these days almost as likely to want to trade Microsoft and other foreign stocks as they are Glaxo or BP. The customer demand is for a global equity market, rather than a series of closed national ones.
It remains to be seen how successful Nasdaq Europe will be in plugging into that demand, or in attracting the necessary degree of liquidity to tempt investors away from national markets, but the idea looks so extraordinarily compelling that it's a wonder it hasn't been tried before. Think about it. One market, open twenty four hours a day, on which it is possible to trade virtually any stock in the world.
It would be a terrible shame to see the London Stock Exchange disappear, but there is still a chance that it can embrace this future and become a part of it, by aligning itself with Nasdaq's plans, or perhaps even taking a shareholding in them.
As for London's position as a financial centre, it is testament to how far things have changed that it doesn't seem to matter very much whether the LSE survives or not. Rather the reverse. Nasdaq's plans will place the processing centre in London, European settlement and clearing will probably be in London, and certainly it seems likely that for the European time zone, liquidity will become concentrated here.
Less clear is that Nasdaq Europe will bring about the entrepreneurial revolution in Britain that Gordon Brown, the Chancellor, dreams of and spoke of yesterday. In this quest, the abolition of capital gains tax and stamp duty would be much more effective weapons, but that prospect seems much further away than a global stock market.Reuse content