No point in a ‘perfect’ stock market if no one’s using it, City figure hits back at Carson Block
There is no point in having a “theoretically perfect” stock market if no one uses it, a top capital markets figure hit back today, after feared short seller Carson Block claimed London should scrap its regulatory overhaul and tighten red tape further.
In a critique of the London Stock Exchange, Carson Block, the founder of activist investor Muddy Waters, said London was engaged in a “race to the bottom” with New York but should change tack to become the “cleanest” market in the world.
“The moral choice for the UK is to say, fine, we will remain somewhat of a niche market and non-tech oriented market, but we will have among the cleanest major liquid markets in the world,” Block told the Telegraph.
“That’s somewhat antithetical to attracting listings but maybe that tells you everything you need to know about a company that would eschew a market that demands accountability and transparency.”
Block’s comments point to a major shake-up underway from the City watchdog that is looking to streamline the listing regime in London and tempt firms back into floating, after a slump in IPOs last year.
In the days before Christmas, the FCA confirmed it would push ahead with plans including merging the premium and standard segments of the markets this year and scrapping a requirement for firms to get shareholder approval for deals, a rule that had been blamed for the loss of Arm to New York last year.
The FCA acknowledged itself that the rule changes would likely lead to an “increased possibility of failures”.
However, Mark Austin, a partner at Latham & Watkins who has been at the heart of a number of reviews of London’s capital markets, hit back at the comments today and said London is “not engaged in a race to the bottom” and reform was underway to stay “relevant.”
“There is no point in having a theoretically ‘perfect’ market if it is not used, or not used in sufficient volume to ensure appropriate liquidity and capital flows,” Austin told Morning Wire “It is not lower standards, it is more flexible standards in key areas.”
In a recent consultation paper, the FCA itself acknowledged that “higher” standards in the UK have not resulted in any observable benefit in terms of cash flowing into the market, Austin noted.
City figures are facing up to a crunch 12 months after a slowdown in IPOs fuelled fears over London’s relevance as a financial market.
New listings in London raised just more than $1bn across the year, the lowest annual total since the financial crisis shook the market globally.