FCA’s plan for stock market reform is both depressing and pragmatic

theguardian.com:

D oes the UK stock market need the biggest shake-up since the 1980s of the rules that apply to listed companies? Well, it’s hard to deny that something has gone wrong – and was going wrong before the Japanese owner of Arm Holdings delivered the latest snub by opting to list the Cambridge-based chip-maker, the UK’s tech champion, in New York.

The number of companies with a listing on the main market in London has fallen by 40% since 2008. Meanwhile, UK pension funds and insurance companies have scarpered to the perceived safety of bonds. They owned 52% of the market in 1990; now just 4%. The buzz ain’t what it used to be. And, since a dynamic stock market tends to go hand in hand with wider economic health, decline matters.

So, in assessing the FCA’s proposals, the default position should be openness to change. Something needs to happen to make London “more accessible, effective, easier to understand and competitive”, as the regulator’s chief executive, Nikhil Rathi, puts it.

Here’s the problem, though. For all the spin, the grand plan could be summarised “if you can’t beat ‘em, join them” – them being the US markets that have never shared London’s worries over shareholder rights and boardroom governance. It looks as if the UK financial authorities, prodded by ministers, have concluded that principles are great until they starting costing you business.

The FCA’s core proposal is to adopt a single class of listed company. So goodbye to London’s “premium” segment that could only be claimed by companies that signed up to strong governance standards. And, just as in the US, companies would no longer have to gain approval from shareholders for very large transactions, or ones with related parties.

What’s more, London would fling