The Not So award goes to ING Barings Securities senior analyst Alexandra Conroy who thinks that the decision by CNOOC to postpone its listing was surprising. 'It's saying to investors that China is still unwilling to operate under market circumstances,' she said. Quite the opposite, Ms Conroy. It actually tells us that the market is working superbly, that the relevant people in the mainland understand precisely how it works and that they are willing to adapt themselves to it. CNOOC, a unit of the mainland's largest offshore oil producer, originally planned a US$2.5 billion dual listing in Hong Kong and New York but then cut the size and price and finally pulled the issue altogether last week. Now ask yourself whether you were willing last week to load up on CNOOC shares when both the New York and Hong Kong markets were falling and all the indicators suggested that the price probably would sag on the first day of trading. You were not, were you? There was no appetite for this issue and, when the people who were selling it realised as much, they saw no reason to push against a rope. You can jolly investors just so much into buying an issue but you can't force feed them and that's that. Perhaps CNOOC could have decided to lower its price even further but would this have served the interests of its parent shareholder? It did what thousands of companies have done before - it bowed to circumstances and decided to wait for a more propitious time. This is the way the market is meant to work and it serves your interests when it does. They understand this fully across the border. The real lesson here is something else entirely. It is that the big investment banks that act as agents to bring these big new issues to the investing public get too much money for their services. Your correspondent does not have at hand all the details of the deal that global co-ordinator Salomon Smith Barney struck with CNOOC but, at a guess, it provided for a payment of 3 to 4 per cent of the value of the issue to Salomon's, split between underwriting fee, selling commission and other costs. Let's say the underwriting fee portion of it was 1.5 to 2 per cent. That underwriting fee, you would think, covers Salomon's risk of promising CNOOC that Salomon's will buy up the shares at the set price if it cannot sell them. But no investment bank takes an underwriting risk like that. What it actually does is start discussing a new issue with big investors at an early stage and getting indications of price from them. Only when it has firm buyers for the issue does it finally fix the price at the level they will buy it and only then does it sign the underwriting agreement. If it cannot get a market clearing price it tells the company for which it is acting to pull the issue. It takes no risk at all. So why should it be paid for an underwriting risk it does not take? There are occasions when these corporate financiers do take a measure of risk but their practice is increasingly to hedge such risks with synthetic instruments. We won't go into all the techniques of how the options they use to do it are structured, but suffice it to say that their costs of covering their risks this way rarely go over 0.5 per cent of the value of the issue they are hedging. So even if they do take an underwriting risk, the market says that the fee they are paid for it is much too high. It is not therefore the mainland that is unwilling to operate under market circumstances, Ms Conroy. It is the investment banks that handle the mainland's new issues, and investors are letting them get away with it. If we are to abandon the traditional meaning of underwriting then it is also time we abandon the traditional fees.