If we agree on that much we should go back and revisit the banking discussion…:) All this is pure libertarian “free money” stuff!

However, I think, depending on what they mean by “regional stock exchanges” this sounds like a thoroughly *bad* idea. There’s a good reason why the regional exchanges (including Cardiff) amalgamated with London – the bulk of the costs involved in establishing a stock exchange are to do with back office functions and high quality, reliable settlement. I’m sure, today, even Wales has a few computers, and people who can operate them in order to trade almost in any market on the planet. Markets have changed. And changed for the better in many ways – not the least of which is the potential ability to get capital in from widely geographically diverse people – on a slightly different scale, look at Kiva – that would have been impossible only a few years ago.

Liquidity is an important factor too. Having had much of their local industrial power bases decimated by nationalization and then the looming end of the local authority bond market, it made it very difficult for market-makers to operate. The generally smaller issues of local companies that continued to happen are often very illiquid (nobody is prepared to hold stock for long as a jobber/market-maker because buyers and sellers so rarely come along). You’ll end up with market principals having to have liquidity requirements on two exchanges for example – which is inefficiently expensive. By encouraging small local investors into shares they cannot shift easily if needed you create problems for both the issuing company and the small shareholder. Furthermore, for small businesses (and let’s not forget that less than a half per cent of all companies in the UK are NOT Small or Medium Enterprises so there’s nothing particularly unique about Wales’s situation) selling shares, and therefore some measure of control, is very often not the best way to raise capital anyway.

Wales is far too small to justify a market on its own – Ireland’s first attempt, the Developing Companies Market failed and they have only just set up a new one, in combination with a specific industrial sector – the oil and gas exploration sector to give it critical mass – and as an economy that is far bigger than Wales. Other than for vanity reasons then (and what is there in reality to boast about in having an insular little illiquid Stock Exchange in a world of global capital) I think this is a thoroughly anachronistic idea.

But, for all sorts of other reasons it is quite desirable to have local networks of capital (at least those that do not exclude wider networks when required); but you need to think outside the box. There are mechanisms that would allow less toxic ways of raising cpaital, such as what I and a number of people around the country are developing locally in the form of what some of us are calling “Open Capital Partnerships” which, to the outside world, might look more like unit trusts or private equity funds to which local networks of people subscribe and which then invest in local enterprises. These could help to get round the liquidity and control issues.

Personally, I would say that this is an issue that governments should keep out of. If there is a call for such things, get them going, speak to local brokers (one good thing that has emerged after the effective closure of the regional exchanges is that some of the firms that dominated those exchanges have gone on to set up much more comprehensive networks of brokers offices around the country), local chambers of commerce and so on. These, not government, should be the nexus for this sort of activity.

(I am open for consultation on these ideas if Jenny or John want to talk about it!)