Think-tank calls for the revival of a Scottish stock exchange

Published on Monday 2 August 2010 23:09

A THINK-tank has today called for the re-establishment of a Scottish stock exchange after Business Secretary Vince Cable, floated the idea of establishing new regional exchanges across the UK in a paper last week.

The Institute of Economic Affairs (IEA) argued that the creation of self-regulated stock exchanges in Scotland and English regions would allow companies to raise cheaper finance than on the more heavily regulated London Stock Exchange (LSE) and would also support its call for lighter touch regulation of the finance sector.

In its paper, Does Britain need a financial regulator?, the think-tank argues that investment markets, financial products, insurance companies and other financial institutions - currently regulated by the soon-to-be disbanded Financial Services Authority (FSA) and the Pensions' Regulator - should allowed to regulate themselves.

The IEA said self-regulation should not extend to banks, which should be governed by the Bank of England.

Tom Miers, a freelance policy expert, said the think-tank's views would "not be popular" with regulators in the UK and Europe, which are cracking down on financial services firms in the wake of the banking crisis.

"That is why the report suggests a limited form of experimentation by having regional stock exchanges as a way of rebuilding trust in financial institutions," noted Miers. Many investors and financiers in Scotland have labelled the notion of a new Scottish stock exchange a "dead duck", arguing electronic trading has made the need for regional exchanges redundant.

Scottish Financial Enterprise chief executive Owen Kelly said: "Scotland has a top quality network of professional advisers who already handle listings for their clients on exchanges like Aim and the LSE. The great strength of London's financial markets is the depth of their liquidity. It is hard to see how regional exchanges, operating independently and outside a common regulatory framework, could compete with that."

But the Scottish Government signalled an interest in the idea. A spokesman said: "It is clear that the Scottish Parliament and Government need to have greater financial responsibilities and economic powers to boost growth and revenues in Scotland's economy. A Scottish stock exchange would be one of the benefits for business of greater economic powers."