So, what is a market? Obviously, it is somewhere where you can buy and sell “stuff.” In a successful economy having a market to trade your goods is fundamental – or to put it another way, if you want to make money, you have to find a place where people want to buy from you and/or you want to be able to sell it to them.
Perhaps it is easier to consider what would happen if you didn’t have such a market? The answer is that if your markets are not attractive to buyers and sellers, then your economy will quite quickly seize up as its lifeblood dries up, just as it would with a person. So what we would want to see is your blood pumping swiftly around your body – in fact the greater the liquidity of the trading and the greater the volume, then the healthier your economy will be.
In the UK we have always been known as a safe place to trade whatever our widgets might be, in a fair and secure market. As we have seen throughout history, a well-run market will become more popular for both buyers and sellers. The bigger the market the more clients it will attract, whether selling or buying.
Of course, you also need to have the market properly managed with fair and acceptable regulation – too much regulation will push up the costs and too little will attract the bandits.
In the UK we have built up a reputation for fair and well-managed trading in whatever market you are in, from stocks and shares to currency and commodities, backed up by a well-regarded legal and accounting system. Such a reputation will take years to build up but can easily be lost. In years gone by the regional investment market in Vancouver fell from favour as it attracted questionable mining companies governed by an ineffectual regulatory structure. Even in highly regarded markets, reputations can easily be lost as we saw with the Ponzi scam run by Bernie Madoff, one-time chairman of the U.S. NASDAQ market in 2008.
So why is this so important for us in the UK? Because we seem to have lost our way as a leading global investment market. We seem to be losing companies from our stock markets and not attracting so many new flotations. So now is the time for some more dynamic thinking from not just our financial industry, but also our politicians to ensure that the financial lifeblood of the UK economy is seen to be both healthy and attractive.
Of course, we have seen greater coordination and mergers with various of our European markets, but we have not really seen the dynamic initiatives of how we can improve the financing and funding of companies utilising the opportunities that the technological advances could be offering us. Merely merging markets is a rather historical action – now we could see some very exciting advances to improve operations, reduce costs and deepen liquidity.
For the UK having opted out of the EU, there should be similar but different thinking to improve not just its own funding markets, but also to drive initiatives on a broader scale around the globe. This could provide not just opportunities for the UK, but if well designed could also enhance the internal EU exchanges. For example, as the UK has just signed up for the Pan Pacific trading group, it would be logical for the UK to think of similar ideas with investment exchanges.
The best course of action would be to link up with the dynamic and fast developing nations that make up the ASEAN group. As an idea we could have the LASEAN (London and ASEAN) investment market which would link those markets to London and provide benefits both ways in terms of funding and also being involved in the technological innovations that both the UK and most of the ASEAN members are known for.
A good start would be Singapore where legal and regulatory issues are often very similar. The UK, despite what is often cited by much of the media, does not have a shortage of potential investment capital. In fact, it has the opposite, as it does not currently provide straightforward access for its large number of pension funds into developing markets, technologies and companies. It could improve liquidity in smaller markets (that is the say, make trading easier with greater volume) and potentially reduce some of the often-hidden costs which financial service companies seem to love so much.
The EU and the UK would benefit from this style of initiative so long as those rather lugubrious “experienced” investment managers and exchange owners are willing to embrace the opportunity and design new investment structures which could take advantage of the fast-changing innovations that the AI technologies may provide for us all.
However, some of these industry “leaders” have shown from experience their lack of imagination to instigate changes: as that tiresome phrase goes, “turkeys would rarely vote for Christmas.” Well perhaps we can replace them by celebrating something more timely, such as the upcoming Chinese Lunar New Year, and wish each other in Mandarin, Gong Xi Fa Cai as we enter the year of the Wood Snake – which is most appropriate for such innovation as it represents patience, wisdom and the ability to change.
We have no shortage of investment monies and no shortage of potential investment companies, but we have a distinct shortfall in the initiative and imagination of those who are supposed to be developing and running our investment markets.
If we really want to grow our economy effectively, we need to have our investment markets attracting the right companies, with the right products and the right finances. It’s a daunting task but one that all Governments must undertake sooner rather than later – or how about now?