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GEMs giving value a bad name

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We shall have to be careful about using the acronym GEM in the future to describe markets. It could rapidly become a synonym for bad luck.

We used it first for the new trivial pursuits board of the stock exchange, the Growth Enterprise Market, and that one has already sunk like a stone since being established.

Now we are likely to use it again for the Global Equity Market, an international scheme proposed this week to link 10 stock exchanges, including Hong Kong's. This one also looks like an immediate loser.

Ask yourself an obvious question. With the rapid spread of the Internet and cheap modern communications technologies why should securities be traded on the floor of a stock exchange? They can be listed in cyberspace where anyone in the world can see the bids and offers and, if some people do not want to do it directly on screen, a trader who will make them a price anywhere in the world at any hour of the day or night is as far away as the nearest telephone.

Stock exchange floors represent 19th Century technology and we have them because that is when securities trading really began to take off. Vested interests do not want to change and this is the principle reason that methods of trading lag the available technology.

But they have been challenged by the cyberspace alternative, most notably in recent years by the Nasdaq market in the United States, and electronic trading is now growing fast.

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