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Investment Exchanges and Clearing Houses Bill

I am very happy to say that we are discussing the Bill before us, not City bonuses; however, perhaps we will return to that issue on another occasion. It is clear that a key factor in the success of the British financial services sector has been the light-touch, risk-based regulatory regime. The Financial Services and Markets Act 2000 replaced the old self-regulatory regime with an approach based on principles, statutory independence, transparency and a rigorous assessment of costs and benefits for each individual regulation. My hon. Friend the Minister has struck the right balance in the Bill between Government intervention and a laissez-faire approach. He made it clear earlier that the Government have no interest in, or concern about, the nationality of the London stock exchange’s ownership. Indeed, the UK markets are already open to overseas investment; for example, the London international financial futures and options exchange is already owned by Euronext. I hope that that satisfies some of the concerns raised earlier by the hon. Member for Twickenham. There is a clear trend toward globalisation in the exchanges, as well as in equity trading, which spells the end of natural monopolies in this piece of financial infrastructure and increased competitiveness in the arena of exchanges. It is interesting to note that, despite the huge increase in turnover volume, fee rates have been maintained and bid-offer spreads have not changed, which means that exchange profitability has risen greatly. That is why the banks are looking again at the ownership of the exchanges. While NASDAQ has been looking at the London stock exchange, the LSE is looking over its shoulder at Project Turquoise—a conglomeration of banks that is looking at the LSE. So in this very fluid situation, it is right that the Government take action to safeguard our regulatory regime. It would be unacceptable if a takeover of the London stock exchange by a US exchange such as NASDAQ led to US regulatory requirements being imposed on UK issuers of securities traded here. The Bill gives the Financial Services Authority the power to prevent regulatory changes that would undermine our approach, and it gives the power of veto not on day-to-day regulation, but on significant changes that would bring about a disproportionate burden of regulation. There are some fundamental principles at issue here. Even those with the most minimalist picture of the role and function of the state acknowledge that it is the state’s function to uphold the rule of law and to maintain the value of the currency. We need to resist the tendency toward extra-territoriality of some other states, particularly in a case where our own regime has been successful in attracting new businesses because it keeps down costs. With this legislation in place, I am sure that we will continue to see the successful and dynamic development of the UK financial services sector.