After New York’s Nasdaq exchange transformed itself from a small electronic quotation system in the 1970s into a technology-backed giant that attracted the premier names of the dot com era, it coined a new 1998 tagline: ‘the stock market for the next hundred years’.
The subsequent crash may have briefly dented its hubris, but the challenger bourse has since become the undisputed hub of global tech and sits alongside New York’s storied exchange with a collective market cap of some $18trillion.
Looking back at that growth, Alasdair Haynes, chief of the City’s upstart exchange Aquis, believes there is a lesson to be learned for London.
“That competitive tension in the 90s really created great innovation and the deep equity markets they have [in the US] today,” he tells City A.M. in an interview. “We desperately need that.”
Regulators and officials are scrambling to overhaul the red tape governing the market and a slew of reports and reviews have been launched to carve out London’s new place in the world.
But Haynes, perhaps understandably as the founder and chief of the capital’s challenger bourse, thinks there could be a more direct route.
“The best way of creating fast change is through competition – because eat somebody else’s lunch and it’s amazing how quickly people respond.”
Eating LSE’s lunch
Aquis was launched in 2013 as a subscription-based exchange for pan-European cash equities but launched its stock exchange in 2020, with the aim of catering to the underserved smaller end of the growth market.
It was founded in an environment which did not make it easy – Companies House prevented any firm from using the term ‘stock exchange’ that is not the London Stock Exchange – but it has since grown to 107 firms and is now looking to scoop up more market share.
He says he is already now eating the lunch of the London Stock Exchange to some extent, hosting 22 IPOs last year, more than its rival AIM.
Slashing red tape
Tempting companies onto the market, Haynes argues, is all about making it a benefit rather than a burden; giving firms something that fits them rather than the market at large. He offers an analogy:
“Companies are very much like children. They start small, they grow and they mature. We send our children off to a primary school, we teach them how to learn,” he says.
“Then we move them to secondary school, we put pressure, we give them homework…ultimately, we send them off to university where they’re on their own, but under the guidance of a professor.”
When it comes to the London Stock Exchange, he says, we have been “taking primary school students and sticking them in university”.
“We were bringing rapidly growing businesses and making them have the governance standards of BP or shell. It didn’t really make sense.”
Making equities sexy
The weighty bureaucracy of London has oft been cited as a deterrent and has been singled out as one of the key areas in need of reform in a host of reviews in the past three years.
One of the main measures cited by Lord Hill’s landmark review of the listings regime in 2020 was an overhaul of prospectuses, which Haynes argues needs completely stripping back.
“Today I get a prospectus and it takes me a weekend to read – there’s 200-300 pages of risk disclosure statements, and some might be the chief executive falls off their bicycle on the way to work,” he says.
But outside of the technical tweaks too, he points to a deeper groundswell needed to make the public markets a pleasant place to be once again.
Equities, he argues, are no just no longer in vogue for investors and the public. The days of ‘Tell Sid’ investment and retail enthusiasm for stocks are gone, and pension cash too has stopped flowing into UK firms.
He says the British public needs to realise the returns offered and begin to put their money to use on the markets.
“There’s literally billions of pounds sitting in cash. That is not a good thing for somebody who’s holding that long term, particularly in a high inflationary environment,” he says. “We need to get those people invested.”
There’s no lack of appetite among the younger cohort, he argues, who are already punting on risky crypto assets. What’s needed is an equity rebrand.
“We need to make equities sexy,” he says.
“It is the black sheep of the family [but] it shouldn’t be – it is probably the best asset class out there historically. If we can change that you will change the UK economy.”
Haynes is calling for an exemption on capital gains tax on regulated growth markets to tempt investors to back growth companies, alongside an overhaul in financial education to help investors understand the market.
There are already moves to encourage the public back in. The City minister Andrew Griffith yesterday called “come back Sid” to a conference of City chiefs, and M&S chair Archie Norman has called for a new wave of shareholder democracy to boost participation.
Changing the mindset will “take some time”, Haynes admits. “But that is why I keep on preaching.”
While the Nasdaq dubbed itself the stock market for the next hundred years, Haynes is hoping Aquis can usher in reform slightly quicker than that.