A plan by Scotland's independence-focused governing party to set up a separate stock exchange may be costly and lack sufficient appeal to make it viable.
"The selling point is: you want to source Scottish funding for Scottish companies," said Mike Sanderson, analyst at Evolution Securities. "Beyond that, it's a bit tricky to see what the attraction is. "You'd have to have a separate regulatory set-up, which would have associated costs. To limit these costs it would have to be the equivalent of something like (London's) Alternative Investment Market (AIM)."
Some analysts point to 2010 as a good time to be kick-starting a new exchange and for listing companies to tap into the hefty increases on UK indexes since a six-year low in March. A recent trend for delisting may also be on the turn.
The total number of companies delisting from AIM during the third quarter of 2009 fell by 10 per cent on the previous quarter, to 65 companies, according to research from City law firm Rowers & Hamlins and accountancy firm UHY Hacker Young. This represents the lowest quarterly total of delistings since the second quarter of 2008. But, analysts say, fewer delistings do not equate to new companies coming to the market, and the key issue is whether there would be any interest in purely Scottish listings.
Scotland has not had its own stock exchange since the Glasgow exchange merged with the London Stock Exchange (LSE) in 1973. The Scottish National Party (SNP) won the most seats in 2007 elections for the Scottish parliament, part of Britain's devolved system of regional government. But it failed to gain an overall majority and has been reliant on other parties to pass legislation. Such support may not be forthcoming for the SNP's plan to press ahead next year with a referendum on constitutional change, including a separate stock exchange which it said would "provide an alternative approach to accessing private capital to assist growth."
Another massive obstacle for a Scottish exchange is that Scottish companies coming to market may still favour the international exposure offered by the LSE or AIM. An LSE spokeswoman said the exchange showed its commitment to Scottish companies through regular visits to Scotland by Chief Executive Xavier Rolet and Marcus Stuttard, head of AIM, and the flotation seminars it runs in key cities such as oil capital Aberdeen. The LSE has 136 Scottish companies on its markets: 106 on the Main Market and 30 on AIM. "We are committed to making sure that Scottish companies benefit from the critical mass of investors that can be accessed through our markets and from the global visibility and recognition available through AIM and the Main Market," the LSE spokeswoman said.
Rolet recently said the trend for stock exchanges was concentration not proliferation. "As the economy is totally global and the same is happening to regulators, we are expecting a reduction in the number of stock markets world-wide, perhaps no more than five in the next five to 10 years," Rolet told La Repubblica newspaper.
Given increasing competition from alternative exchanges, analysts say a Scottish exchange might have to be subsidised, probably by the Scottish taxpayer. Such exchanges would be far more likely to attract newer, smaller companies, rather than persuading existing major players such as Royal Bank of Scotland to switch their listing from the LSE.
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