How would you summarise your experience at the QCA?
It was a serious personal challenge at the time and an incredible learning experience, especially as our initial message was very robust; that if the LSE no longer wished to accommodate the UK’s growing companies then we would create a new market. Fortunately we found support from every quarter including the Bank of England, 10 Downing Street and ultimately the LSE itself so a revolution was not needed. But the QCA had been mobilised, and not as a singe issue interest group. Soon we were having an impact on other matters such as the Cadbury code and UK fiscal policy.
How do you think the financial markets have changed over the last 30 years?
The most significant change of the last 30 years, and the one that is most overlooked, is the long term decline in the number of companies listing on regulated markets in most developed economies. Unless and until the primary market capital raising process embraces innovation, and policymakers do something effective to make a listing more attractive, the majority of UK listed companies might soon be collective investment vehicles.
What do you think are the three most important things small and mid-caps need to thrive on UK financial markets?
First, a thorough understanding of how the equity markets are structured and how they work – the difference between “listing” and “admission to trading”, what “liquidity” is in reality, how short sales and stock lending works. Second, a rigorous and objective approach to advisor selection that matches that of any other significant procurement decision. Third, a hands on approach to investor relations; investors want to meet and talk to the company, not advisors and intermediaries.
What do you think is the biggest achievement of the QCA?
The inclusion of listed companies themselves. Capital markets policy making is highly vulnerable to “regulatory capture”, where those actors with vested interests are considered the experts and take the lead role in shaping policy decisions. Take for example the recent study into the UK listing regime led by Lord Hill in which ideas on how to encourage SPACS somehow emerged as part of the recommendations. Long may the QCA represent the voice of listed companies, and I would encourage it to be as robust in 2022 as it was in 1992.
What is the biggest challenge small and mid-caps have faced in the last 30 years?
Indexation and passive investing. There are many contributing factors to the growth in passive investing, and active fund managers are themselves partly to blame, but at a macro level one of the key factors is the long term decline in the number of listings whilst cheap money has fuelled the boom in private equity.
What challenges do you think small and mid-caps will face over the next 30 years?
First, there remain valid concerns that an equity market that is primarily structured to meet the liquidity profile of companies with valuations of many billions might not be best structured to meet the needs of companies whose liquidity profile is entirely different. Second, we need regulation that is designed to protect investors from fraud and bad agents, not regulations designed to guarantee positive outcomes. Third, we need innovation in the capital raising process in order to reduce the frictional costs, make it more inclusive, and deliver fairer outcomes for companies and investors.
Richard was in the vanguard of innovation and automation in the equity markets since the Big Bang in the 1980’s when he joined the London Stock Exchange. He subsequently came to be the founding CEO of the QCA (CISCO as it was then known), COO and Head of Retail Trading at BZW, Global head of Electronic Trading at Credit Suisse, and President and CEO of Instinet in Europe. He is currently the non-exec Chairman of Saxo Capital Markets in the UK, the non-exec Chairman of SquareBook, and a non-exec director of CBOE.
His years at the LSE culminated in him being appointed Head of UK National Markets in a period of rapid transformation during which the LSE struggled to redefine itself in the new competitive global market place into which it had been unwillingly thrust. These were the most difficult years in LSE’s history, and what many considered its prime purpose – providing trusted capital markets which are a source of permanent equity capital for UK listed companies – seemed unfortunately to be getting lost in the turbulence. A confluence of events spurred a wide cross section of those involved in the markets to act and make sure the voice of smaller listed companies was heard. Led by Andrew Beeson and a 17 strong cohort that included such diverse personalities as Sir Ronald Cohen, Brian Winterflood and Marc Cramsie, the City Group for Smaller Companies was formed, and very fortunately Richard was invited to the party.