Why capitalism, not stereotypical politicians, should decide whether the London Stock Exchange merger goes ahead

 
Tim Worstall
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London Stock Exchange
The London Stock Exchange agreed a £21bn merger with Deutsche Boerse last month (Source: Getty)

It's always fun to see national stereotypes on display.

Bill Cash loudly insisting that the Germans are too unimaginative and inflexible to be allowed to run the London Stock Exchange.

Ulrich Caspar not exactly disproving him with the insistence that any and every stock exchange must be under the control of a provincial government with the development of it from a business perspective coming a distant second.

Read more: Brexit warning from Germany over London Stock Exchange merger

Fun though such stereotypes are, they're also an excuse for not thinking: and here with a marketplace the only people we need or want to think about at all are the people who use it to trade.

At which point near all of the European complaints about London just fall away.

Caspar, for example, has been quoted here for insisting that the exchange cannot be controlled from outside the eurozone because Europe.

But those who trade European stocks have already made that determination: they currently trade perfectly happily outside the eurozone and in a market controlled by a non eurozone organisation.

Read more: More political pressure on London Stock Exchange merger

We reach a similar conclusion considering any American bid for the LSE.

In policy terms our only interest is in making sure that people have a legal and safe place to trade whatever stocks they wish to trade in that place.

Who owns the computer network they do it over is of no consequence whatever. Perhaps as important as who owns the mobile phone tower our call is handled by but no more than that.

Read more: Another twist in the London Stock Exchange merger story

If there's no public policy issue to worry about then what else is there?

The answer being that stock exchanges are pretty much the ultimate capitalist organisation and thus we might as well be capitalist about it.

Those who currently own it get to decide who they will sell it to and the rest of us wind our necks in.

The reason we do it this way is because we've found by bitter experience that people who own things care about the things they own.

People do not pay vast sums of money for an asset to then break it.

Read more: LSE chief denies merger would see Germans take control

Where share trading takes place will be, as it has observably been in recent decades as London nicked the European business, determined by where people wish to trade shares, not by where the people who own the marketplace are.

Given this the only thing left to think about is who gets to decide who runs it?

And given that we're talking about capitalism, that's the people who currently own it and no one else.

Highest bidder wins and good luck to all who sail in her.

Read more: Trust LSE shareholders to make right decision

And if that bid or merger fails?

Anyone think that London is short of the capital to build a market upon which people can trade shares?

Assuming the current one doesn't do very well?

Quite: perhaps we capitalists should be displaying just a little more faith in capitalism.