Monitor

How interesting to hear the stock exchange tell us in almost a single breath that it wants both to relax listing requirements for warrants and to consider cancelling listings that have proved to be flops.

Yes, progress at last. We are once again to make our stock market an easy meal for the wolves, but, no, we are not soft touches. We will consider telling those wolves they must leave after dessert.

Of course, it may have been a chance remark for exchange chief executive Kwong Ki-chi to say he is studying Nasdaq's practice of delisting companies whose share prices have fallen below US$1 for a certain time. The emphasis of his message was rather that the exchange must make it easier to list warrants or exchanges abroad would take the business away.

Let us remember we have heard this all before. It was the rationale for starting the Trivial Pursuits Board (GEM) two years ago. We were told we had to encourage our small entrepreneurs with lax listing requirements on a special board or they would flee to Nasdaq.

Nasdaq obviously has a few ideas about what to do with the sorts of headaches we have listed on GEM but let's hear it from you, folks. Who is willing to put money down that Mr Kwong is truly serious about Nasdaq-style delistings? He would wipe GEM out tomorrow if he did it.

Here is the conundrum. A stock exchange is not an entrepreneurial firm risking its money to build a business. It is rather a mechanism or a service making it easier for companies to raise the money they need.

Whether this takes the form of a stock exchange physically present on the ground or Nasdaq up there as millions of 'buy' and 'sell' signals bounced between satellites is of little significance to our real interests.

What matters is that our entrepreneurs should have ready access to a liquid market for capital - that their shares can be bought and sold in size at tight bid and offer spreads and that buyers and sellers can have confidence in this market. If Nasdaq can do this for them as well our own exchange then it is a waste to pay Mr Kwong millions of dollars a year to do it too. In fact, we are better off going the Nasdaq route as the technology of securities trading is inexorably headed there. The stock exchange floor has had its day. The satellite ceiling is taking over rapidly and we can only keep our position as a service centre if we stay at the leading edge of service technology.

But we have gone precisely the other way. We have frozen ourselves into the past by listing our exchange as a company of its own, thereby placing the narrow interests of a narrow shareholder base over the broad interests of million of users.

These shareholders naturally want to generate more earnings and inevitably they lean to the easy way of doing it. Relax the listing requirements and more listings will come in. We landed ourselves with a huge embarrassment by doing it with GEM but Mr Kwong and colleagues obviously have short memories.

They are simply wrong when they argue that we can afford to relax listing rules because regulatory environments abroad are laxer than ours. Nasdaq's is laxer on paper but anyone who thinks Nasdaq is lax has never read a Nasdaq regulatory filing or had a class-action lawsuit.

And if it is a competitive threat from Singapore that is the worry they would do well to remember it was Singapore that hosted the collapse of Barings. It is a distinction we can do without. We are going the wrong way here again.