In many ways Patrick Birley is everything you would expect of the chief executive of junior stock market operator Nex Exchange. In his own words, “I’ve worked for an awful lot of exchanges”: LCH Clearnet, the NYSE Euronext, the European Climate Exchange and the London Metal Exchange to name a few.
However, you could be excused for not having heard of his latest venture, the Nex Exchange. The market was known as ISDX until the recent Tullett Prebon-Icap deal, which resulted in the creation of the Nex Group name.
Birley’s mission as chief executive of Nex Exchange is to get its name out there.
As befitting the man who owns an almost life-size sculpture of a bull made from two pence pieces, which stands proudly in the corridors of Nex Group, he is launching a direct challenge to the London Stock Exchange’s Alternative Investment Market (Aim).
Read more: Nex shares slide despite Trumped-up earnings
Aiming to upset the market
Birley recently launched an offer to all Aim companies “of good standing” to join his exchange for free for a year and be dual-listed.
“And then our cheeky offer to them is: come and join us for a year, be on both, and at the end of the year when you get your renewal notice from Aim and your renewal notice from us, decide which you’re going to keep,” he says.
Nex Exchange, under a different name, was acquired by Michael Spencer’s Icap in 2012. It is currently home to around 85 companies, the biggest of which is Arsenal Holdings, the group which operates Arsenal Football Club. This is a one-off.
Nex’s focus is on smaller companies, and seems particularly attractive to the drinks industry, with Adnams, Chapel Down, Shepherd Neame, Daniel Thwaites and even National Milk Records all on board.
The Nex step
Nex Exchange is still small: it has 14 employees and is not yet profitable. Birley’s aim is to grow the exchange, and he believes it will hit profitability when it has 120 listed companies.
Birley knows what it is like to start small. He is not a university graduate, choosing instead to travel after leaving school. He began his career in South Africa, where he worked for the South African Futures Exchange. And his previous job, before taking the Nex Exchange reins in 2014, was leading Goddard’s Brewery on the Isle of Wight.
While he retains an interest in beer, “probably more in consuming it than brewing it at the moment”, and doesn’t rule out a return to this industry one day, Birley appears determined to make a success of Nex Exchange.
“My view was that this was an extraordinary opportunity to build something really quite worthwhile,” he says. “That we would focus on the small-cap end of the market. That we would focus on a market that was much more an old-style stock exchange, really focused on understanding the needs of the corporates: why did they want to come and market, what can we do to facilitate them coming on market, and understanding the needs of investors.”
The Ryanair of exchanges
Fighting talk and cheeky offers are all very well. But the London Stock Exchange would argue that Aim has been competing with the Nex Exchange, under different names and forms, throughout its history, and has established itself as a superior junior market.
There can be no denying Aim has also built up a strong brand. How can Birley compete and convince companies to join his exchange? “Two things,” he says. “A much more engaged service. I don’t want to criticise Aim, but we know our companies, we know them well, we engage with them, we offer a very bespoke service: what is it that you want to achieve and how can we help you achieve that? And secondly it’s costs. We are about a quarter of the cost.”
The price is right
Price appears to be the key way Birley intends to entice companies on to Nex, which he compares to a “budget airline”.
“Somebody recently compared us to the EasyJet and the Ryanair of exchanges, and I’m perfectly happy with that,” he says. “The safety standards aren’t any different, the safety standards are just as good with those airlines as they are with the traditional airlines.”
The response from the presumed British Airways of exchanges? Marcus Stuttard, head of Aim, tells City A.M.: "From our globally successful growth market Aim, which over its 22 year history has supported over 3,600 companies to raise £100bn, to our private business support and capital raising programme, Elite, London Stock Exchange is committed to supporting ambitious businesses.”