HL Deb 15 December 1983 vol 446 cc356-67

3.54 p.m.

The Chancellor of the Duchy of Lancaster (Lord Cockfield)

My Lords. I beg to move that this Bill be now read a second time. The Bill exempts the Stock Exchange from the Restrictive Trade Practices Act. The rule book on the Stock Exchange was registered by the Director General of Fair Trading in October 1977 and referred by him to the Restrictive Practices Court in February 1979. Thus more than six years have passed since the rule book was registered and close on five years since the case was referred to the Restrictive Practices Court.

The Stock Exchange is an institution of great importance and value to the country. It plays a key role in the United Kingdom capital markets. It provides a large and liquid market for the issue of Government securities and plays a significant part in the financing of United Kingdom industry. Among our European partners we have by far the most developed and active Stock Exchange, and in the United Kingdom companies can look to the Stock Exchange for a much greater proportion of their financing than in the case of other member states.

It is essential that the exchange should continue to provide the efficient market in securities that is vital to the working of the economy. It also provides a very active large-scale secondary market for securities, which is an important service in itself, in addition to the role it plays in assisting new fund-raising. The Stock Exchange is an important contributor to the country's overseas earnings.

During the lengthy period the case has been in preparation—some five or six years—the Stock Exchange has been on the defensive, seeking to avoid action which might have prejudiced its case. This seriously inhibited its capacity to respond to changing circumstances and opportunities. This uncertainty was likely to continue for some time to come and, even when the stage was reached when judgment was given, a further period would have supervened in making whatever changes were necessary to conform with the judgment. The Government therefore took the view that it would be better to seek an early resolution of the matter out of court, if, but only if, the Stock Exchange was prepared to make changes in its practices which would meet the major concerns expressed both by the director general and more generally.

The Government and the Stock Exchange were not alone in recognising the necessity for there to be continuous development of financial markets. There was a general acknowledgement in the City of London that early action on such matters as commission scales was needed.

Discussions were therefore held with the chairman of the Stock Exchange on the major matters of concern to the director general with a view to seeing whether there was a basis for exempting the Stock Exchange from the Act. On the basis of certain major changes to be made by the Stock Exchange, my right honourable friend the Member for Hertsmere announced on 27th July that legislation would be introduced to exempt the Stock Exchange from the Restrictive Trade Practices Act. The present Bill gives effect to that intention.

The changes now made by the Stock Exchange are as follows: first, minimum commissions. The council of the Stock Exchange agreed to dismantle by stages, and with no unreasonable delay, all the rules which prescribe minimum scales of commission, completing this process by 31st December 1986 at the latest.

The council has already announced its decision that the first step in dismantling the minimum commissions will be to abolish them for overseas securities, and its intention that the relevant rule changes will come into force at the beginning of April 1984. The Government accept this as a significant first step, and one which is of particular relevance to the maintenance of the exchange's international competitiveness. Additionally, the Stock Exchange Council has announced that it is formulating rules that will enable firms to undertake international securities business on a similar basis to competing overseas firms. This and the move to fully negotiated commissions should enable brokers to compete and increase their market share in international securities business.

The second change concerns membership of the council and admission to membership of the exchange. For the first time, lay members will be included in the council of the Stock Exchange. The governor of the Bank of England and the chairman have agreed that lay members will account for up to 25 per cent. of the council and will be appointed by the council with the approval of the governor.

At least five lay members should join the council shortly. Further, a new appeal body, independent of the Stock Exchange members of the council, will be established. If the council rejects an application for membership by a person who fulfils the requirements of the rules, the appeal body can review the decision and overrule it. This body can include lay members of the council, but Stock Exchange members would not be eligible. The changes will also introduce people who are not Stock Exchange members of the council to the Stock Exchange's existing appeals committee on disciplinary matters so that they would constitute at least a majority on the committee. Lay members of the council will be eligible to serve on this committee.

Third, non-members of the Stock Exchange will be permitted to serve as non-executive directors of limited liability corporate members of the Stock Exchange, provided there is always a majority of directors who are members of the exchange. It is already possible for a limited liability corporate member to be wholly owned by non-members, and, with the permission of the council, for a single non-member to own up to 29.9 per cent. of such a corporate member, so long as control is exercised by members of the Stock Exchange. This further change will make it easier for member firms of the Stock Exchange to attract outside capital. There is already evidence that this is happening.

On one important point, no change is proposed. That is on the question of single capacity. Single capacity has been a clear-cut and well understood way of protecting investors against unfair trading practices. There are many who believe that single capacity cannot long survive the disappearance of minimum commissions. Time alone will tell. The crucial point is that, if single capacity does disappear, adequate safeguards should be put in place to protect investors—and in advance. Developments in the market and the implementation of these proposals will he monitored by the Government and the Bank of England. The Stock Exchange is fully collaborating with the authorities to this end.

The changes which have now been set in train represent a major step forward. They mean that the Stock Exchange must now operate in a freer, more competitive atmosphere. They fully justify the decision that the litigation should not be pursued further but that instead the matter should be dealt with by Act of Parliament. To proceed in this way is fully justified. Law enforcement agencies must proceed under the law as it stands. But responsibility for the law rests with Parliament and no one else. If Parliament decides that the law needs amendment, then it is for Parliament so to do. That is the justification for the Bill before your Lordships this afternoon.

I will as is customary deal briefly with the details of the Bill. The substantive provisions are all contained in Clause I. Subsection (1) describes the agreements which are to be exempted from the Restrictive Trade Practices Act. Subsection (1)(a) effectively exempts the rules and regulations of the Stock Exchange which, for the purposes of the Restrictive Trade Practices Act, constitute an agreement between members of the exchange. Subsection (3) makes explicit that this exemption includes the Deed of Settlement of the Stock Exchange and its various rules, regulations and usages, as well as recommendations made by its council.

Subsection (1)(b) covers agreements involving the Government or the Bank of England. It is possible that the Stock Exchange might enter into some arrangement with the Government or the hank in the course of the monitoring arrangements I have mentioned, and that this arrangement might be an agreement which would otherwise be registrable under the Act. It would be wrong that such an arrangement should become registrable simply because the Government or the bank were a party to it.

Subsection (2) will require the Director General of Fair Trading to remove the present agreement of the Stock Exchange from the Register of Restrictive Agreements, and formally terminates the proceedings which had already been started in respect of the present agreement. I have already referred to subsection (3).

My Lords, the Bill will enable the Stock Exchange to evolve and to respond to the changing needs of our times under the spur of competition, particularly international competition. Change is already evident and is proceeding at a greater rate than many would have thought possible. This is all to the good. My Lords, I commend the Bill to the House.

Moved, That the Bill be now read a second time.—(Lord Cockfield.)

4.6 p.m.

Lord Bruce of Donington

My Lords, the House will be grateful to the noble Lord for his introduction of this Bill, but it is important to realise what is the basic principle behind the Bill. It is of course an interference with the process of law. There can be no question about that. Of course Parliament has a right, as the noble Lord has said, to do that, but it has very rarely interfered with the process of law once that process is in operation.

The Bill did not feature in the election manifesto of the party opposite, nor, so far as I am aware, was it referred to in any of the speeches made at the time of the election. That is not surprising, because of course the practical impact of the Bill, as such, as it affects the population as a whole is small. As noble Lords are probably aware, the percentage of the share of individual shareholdings in total investment in this country has progressively declined over the years. In 1963 the percentage of shares personally held by individuals was something in the region of 54 per cent. In 1980, the last year for which figures are available, that figure was down to some 24 per cent. Therefore, the number of individuals holding shares in companies quoted on the Stock Exchange is progressively diminishing.

Moreover, bearing in mind that some 1 per cent. of the adult population of the country own far more of the country's total wealth than the 80 per cent. of the population at the bottom end of the scale, and in view of the fact that there are about 7 million people at, or below, supplementary benefit level, it is easy to see that questions affecting individual shareholdings are not likely to be the cause of any general popular concern.

That does not mean that the questions raised by the Bill are not important. In this case, as the noble Lord has said, there was a notice of reference made by Mr. John Smith, the then Secretary of State for Trade in the then Labour Government, on 9th February 1979. Subsequent to that there was a general election in May 1979, as a result of which Mr. John Nott, as he then was, became the Secretary of State for Industry. As was quite natural—and the reference having been made to the Restrictive Practices Court by the former Minister—very long and consistent representations were made by the Stock Exchange to the then Secretary of State. He gave them his most careful consideration, as all Ministers do. If one views the publicity available at that time, and the words that were used. one finds that the activities of the Stock Exchange—to which the noble Lord has paid such great tribute and from which I would not wish to detract in any way—were made in almost identical terms in 1979. In other words, all the virtues of the Stock Exchange that have been put forward, its contribution to domestic investment and all the rest, were well known, well understood, well advertised and. presumably, were well accepted in 1979.

The Stock Exchange negotiated with the Minister. With your Lordships' permission, I should like to read the reaction of Mr. John Nott to the representations made to him by the Stock Exchange that it should be exempted from the provisions of the Restrictive Trade Practices Act. I quote from the Hansard of another place. This is what Mr. Non said: Several months ago the Stock Exchange requested that its agreement should be removed from the scope of the legislation on the ground that the Restrictive Practices Court is not an appropriate body to investigate its activities. There has been a considerable amount of correspondence between Ministers and the Stock Exchange and a great weight of evidence has passed between us. I regret to tell the House that I cannot meet the request of the Stock Exchange. However, I am concerned that adequate regulation of the security markets should be preserved. I recognise the value of self-regulation in which the Council of the Stock Exchange has a central role to play. I believe that the amendment to the Act to which I referred earlier, and which will give this breathing space following the announcement of the finding by the court, may be of help to the Stock Exchange should the court make certain findings at the end of its investigation. He emphasised that further by saying: I do not intend to lay an exemption order and I have made that clear. I have said that I cannot meet the request of the Stock Exchange."—[Official Report, Commons, 23/ 12/79: cols. 230–231.] That was a reasonably clear statement: a statement made by the Minister after full knowledge of the facts, after careful consideration of all the factors that were laid before him and with full knowledge of the value of the Stock Exchange and its activities to which the noble Lord has referred today.

The representations of the Stock Exchange were successful to a limited degree, because in one of the provisions of the Competition Bill (on which Mr. Nott was speaking at that time on 23rd October) which was of particular importance to the Stock Exchange, was that after the court had determined its opinion and given its findings, there would be a further period of nine months during which the Stock Exchange could give effect, presumably by stages, in order to be able to conform to the findings of the court. That provision was Section 26. That was on 23rd October 1979, some four years ago. The Minister was as good as his word, as I learned from the Stock Exchange that the reference was served on it six days later, on 29th October 1979. There the matter rested.

In January 1981 there was a new and distinguished Secretary of State, Mr. John Biffen, whose officials undoubtedly must have kept him fully informed as to how proceedings were going. He did not see fit to interrupt the proceedings in any way. As your Lordships will be aware, in April 1982 he left office and was succeeded by the noble Lord opposite. The noble Lord came into office in April 1982 and he was there until June 1983. If I may say so, he served in this office with distinction and we respected him for his activities in that post. During that time the noble Lord must have had consultations with the Director General of Fair Trading. He must have received representations from the Stock Exchange, if it was running true to form; yet even the noble Lord opposite—perhaps I should not say "even the noble Lord opposite", perhaps I should say "the noble Lord opposite with his great passion for development of free competition"—still adhered to the views of his predecessors that the activities of the Stock Exchange distorted the pattern of trade and were not in the public interest. The noble Lord opposite, in full conformity with his passionate belief in free competition, did not seek in any way to interfere.

It was only in July 1983, immediately following the election, when the noble Lord was succeeded by Mr. Cecil Parkinson, that we suddenly found that all the considerations that had led both the great parties of state in the United Kingdom to make and to support this reference in the public interest and in the interests of free competition were cast aside by Mr. Cecil Parkinson. Thus we have a situation in which it appears either that a gross error of judgment was made in the first instance by referring it at all—this would be hard to sustain in view of the comments that came from both sides of the House in this place and in another place—or there have been considerable misjudgments ever since. There is a complete volte-face. At one moment we were all behind the court reference. yet somehow—immediately following an election at which the party opposite were highly successful—there is suddenly a reopening of discussions with the Stock Exchange with the result that there is interference with the action itself.

It is important to note that the Bill does not merely interfere with the existing reference. It does not merely expunge any reference from the records; it does it indefinitely. It sets no period of time; it exempts once and for all the activities of the Stock Exchange from the operation of the Restrictive Practices Court.

One could have understood, perhaps, if the Govern- ment had seen fit to adopt a fall-hack position. Prudence would have suggested this. The processes of their thoughts from beginning to end on the matter have still to be explained. The Stock Exchange submitted its rules to the Director of Fair Trading in 1976, whereupon he found no fewer than 173 instances in which their rules infringed the laws as they then stood. If, after all this time, the Government were persuaded that voluntary action was desirable, why could they not have taken out an insurance policy? Why could they not say, "The agreement you have made with us expires on 31st December 1986, by which time you will have done the right thing"? Why did they not then limit the operation of this Bill to the years to 31st December 1986? After all, if the Government really believe that the agreement is going to be carried out, what harm is there in doing that?

As it is, it is not only the Stock Exchange that are exempted from the Restrictive Practices Act, it is also any agreements that are reached by them with the Bank of England and/or the Government and/or other bodies. So, despite the fact that those agreements were before the Director of Fair Trading, and were in fact referred to the Restrictive Practices Court, they might be found to be illegal; they might be found to be within the provisions of the Act itself. What the Government are doing in the Bill really is giving themselves liberty to arrive at agreements with the Stock Exchange that may infringe the rules of free competition and monopoly as described in the Fair Trading Act 1973 itself This seems to be a very shortsighted policy indeed. The noble Lord has referred to an agreement with the Stock Exchange. How does he propose to enforce that agreement if for any reason the Stock Exchange finds it inconvenient to perform the agreement? After all, it has found the existing legal provisions of the Act something that it does not like and has succeeded in persuading the Government to interfere in the legal process. Why should not the Stock Exchange, towards 31st December 1986, persuade the Government again? In those circumstances, will the Government come along to the House and say, "We are very sorry but in view of the legal costs involved"—and that sounds a little odd in view of the £7 million that was paid to the City in the flotation of British Aerospace—"we do not think it worthwhile to go on; it will interfere with the activities of the Stock Exchange"?

I want to know from the noble Lord opposite how the agreement to which he has referred is to be enforced. How does he intend to enforce it? Surely the most sensible way would have been to have allowed the Restrictive Practices Court that has been considering all the documentation and all the representations to arrive at its own findings and for the Stock Exchange then to have taken, if necessary, the nine months that were necessary to carry out its findings. The advantages of that are that there would be certainty as to what was lawful and what was not lawful. This is something that we are debarred now from knowing. If the court made its findings and the Stock Exchange complied with those findings within the period of nine months—though it first of all appeared as six months, with a right to apply to the court for a further three months under this particular section—this would be a far better and more sensible way of going about it.

I have to suggest to the House that this Bill is a bad precedent. It gives some colour to the belief that there is one law for the strong who have money power behind them and another for the weak. May I give your Lordships two or three examples? Your Lordships will recall that when it came to Rhodesian sanctions the case was considered but that, because one or two of those who would have been involved in proceedings had died, it was decided not to proceed resolutely with the case. In fact, no case was brought. But there is another law for the weak, as one knows. This very often has expressed itself in a reluctance by the Government to enforce laws that protect the weak. I am referring to their reluctance to proceed against firms that do not obey the dictates of the wages councils inflicting minimum wages.

There is a very great reluctance to proceed against employers on that basis. There is very often a reluctance to bring cases involving safety factors and there is very often an enthusiasm to pursue relentlessly those among the lower-paid sections of our population who disobey the social security regulations; although I am not suggesting for one moment that they should do anything but obey them. But there the law is pursued with rigour. At the case at Oxford, as many of your Lordships will recall, some 100 people were detained for about ten hours in a very draughty school in Oxford and afterwards released, on the mere suspicion that they had broken the social security regulations. It would be unfortunate if the impression were given that there is one law for the strong and another for the weak. I do not think it would be in the interests of the country if that were apprehended.

May I remind your Lordships of the statement by the Prime Minister in another place two days ago? She said: The law is absolutely indivisible. People cannot choose which parts of it they uphold and which parts they flout. It must all be upheld". I think that this particular case shows all too clearly that the powerful have been able to persuade the Government and that the Government have willingly given in to them to abate—which is rather a curious legal term which means withdraw—from the legal action which, the Stock Exchange apprehended, would embarrass them considerably.

In this House, by convention, we do not vote against the Second Reading of a Bill, but it is to be hoped that at Committee stage some support may be gained from all sides of the Chamber for amendments to the Bill which will limit its effect and make it more compatible with the traditions of law with which noble Lords on all sides of the House are familiar and which they support. In the meantime we must, I am afraid, take the view that this Bill should be discarded into the political dustbin.

4.31 p.m.

Lord Mais

My Lords, may I first say that I am not a stockbroker but I have, like most Members of your Lordships' House, had dealings with the Stock Exchange on frequent occasions both personally and for the charitable organisations with which I am connected. What concerns me most was referred to by the noble Lord. Lord Bruce of Donington: that is, why it was decided to withdraw the reference regarding the Stock Exchange from the Restrictive Practices Court and why the Director General of Fair Trading was required to erase from his register all entries currently made in respect of the Stock Exchange.

It is perhaps regrettable that the amendment proposed in another place by the honourable Member for Dagenham was not carried, because that would have ensured that the Stock Exchange did not completely escape from the terms of the Restrictive Practices Act. As it now stands, it will be free from any further action and free from the provisions of the Restrictive Trade Practices Act. It will be hound only by the unenforceable agreement which they have entered into, the terms of which expire in 1986. It is hoped that by 1986, or before, the Stock Exchange will have completed the agreement it has entered into, and presumably it will have included, I hope, lay members on the Stock Exchange Council. Even more important, it will have ceased to operate the minimum commission system.

I can understand the Government's desire and also the desire of the Stock Exchange that this should be settled in-house by the Stock Exchange rather than having it forced upon them by the Restrictive Trade Practices Act: but what I cannot understand is why should it take until 1986 before we come to a conclusion? And why will it be that period of time before they initiate the inclusion of lay members of the Council and end the minimum commission? Presumably when they have done this in 1986, or before, it will still have to be considered by Her Majesty's Government.

The Stock Exchange has obviously been well aware of these changes, or at least they had them in mind; and now that the ball has been put back into their court to find a solution which is acceptable both to Her Majesty's Government and to the Stock Exchange, it is hoped that they w ill put their proposals forward, in whole or in part, before 1986. It is in everybody's interest that this state of uncertainty should be cleared up as quickly as possible, and I should have thought that it would be a simple matter for the Stock Exchange to send progress reports to the Government reporting on how they have progressed and what reforms have been carried out. This House could then be informed of how far the actual reorganisation had progressed.

This is, after all, the first step towards the reform of the Stock Exchange and it will create something which many have thought is long overdue: that is, a competitive Stock Exchange, together with a series of reforms that will move in the direction of self-regulation, apart from the abolition of the minimum commission. We hope that the submission by the pension funds and the investment companies on this subject will bring additional influence to bear.

For a considerable number of years there has been a general view in favour of abolishing the minimum commission, the strongest of which, in my view, is the possibility that the compensation fund, which protects all investors, has to be looked at very carefully. There is a slight risk, but nevertheless a risk, that the compensation fund for investors might be in jeopardy. Furthermore, it has been said that the cost of purchasing investments or shares by the small investor is likely to increase. I do not think there are any Members of your Lordships' House who would disagree with the proposition that the protection of the investor is paramount.

Perhaps it would help this House in arriving at whatever conclusion we do arrive at to know how many of the Stock Exchange rules which were referred to the Office of Fair Trading were abolished or amended by that department, by agreement with the Stock Exchange, and whether the reference has not been terminated. One must not lose sight of the fact that one of the principal roles of the Stock Exchange is to raise finance for commerce and industry generally as well as for the Government. Because of this policy and its ability and enterprise over the years that it has been in existence, companies have looked to the Stock Exchange for many of their financial needs. It must also be remembered that the Stock Exchange system for dealing with Government borrowing is—I would not say "second to none", but it is very near it.

I also ask your Lordships to consider the relationship between the Secretary of State for Trade and Industry and the Director General of Fair Trading. The Bill demonstrates that the Secretary of State has treated the Director General of the Office of Fair Trading in—shall I say?—a rather cavalier manner. He has attempted to interfere in the relationship between the Director General and the Restrictive Practices Court. The Secretary of State has ordered the Director General, over whom he has no ministerial responsibility, to stop the proceedings; and they have in effect been terminated.

May I draw your Lordships' attention to the fact that the European Commission could well be involved in this matter? They have rules regarding restrictive practices. They may well take the view that the practices involved do not comply with the European Community rules. So we may yet have a third party in the battle before it is finally settled.

The situation as it now exists is somewhat confusing, with the Director General of Fair Trading obviously at cross-purposes with the Secretary of State. Apparently, no solution is likely before 1986, unless a policy is adopted of interim reports which can be made available to this House and another place. I do not see why this cannot be done. 1 am quite certain that, if the Stock Exchange was approached and told that Her Majesty's Government required interim reports as to how it was getting on with the reorganisation, it would be only too willing to comply.

Lastly, one must not lose sight of the fact that the Stock Exchange has provided a really first-class service to individuals and to businesses over many years. At the moment I do not know whether it is confused—I certainly am—as to exactly where it stands. I hope that any misunderstanding in this direction as regards both its present situation and its future situation will be cleared up as quickly as possible.

4.42 p.m.

Lord Brabazon of Tara

My Lords, in rising to speak for the first time in your Lordships' House, I must declare an interest, in that I am a member of the Stock Exchange. I hope that I can make a useful contribution to this afternoon's debate. I must say straight away that I am in favour of the Bill, as I think are the majority of members. The vote taken to make the necessary changes to the deed of settlement was overwhelmingly passed by the Stock Exchange membership. I never really believed that the Restrictive Practices Court was the right place to change such a complicated set of rules as the Stock Exchange has, but I hope that this will be history if the Bill is passed.

I should like to make the point that the rule book, as it now exists, is mainly to protect the public and the central market. Members must be qualified to give advice to their clients, firms must be financially sound and the books are inspected regularly. The broker-jobber relationship ensures as fair a price as possible for the transaction of business, settlement must take place effectively and efficiently and the companies listed must pass the rigorous rules of the quotations department.

Three major practices which offended the Office of Fair Trading were, first, the membership of the Stock Exchange and its council; secondly, minimum commissions; and, thirdly, the single capacity. As regards the Stock Exchange Council and its membership, it has already been agreed that this will change and, in fact, five lay members will be appointed very soon. I do not think that the noble Lord, Lord Mais, will have to wait long before that takes place. The new council may include up to 25 per cent. lay members. In fact, as the noble Lord said, the disciplinary committee will have a majority of lay members. Stock Exchange firms may already have outside shareholders. Two are fully quoted and outside directors are to be allowed to be appointed to the boards of these firms.

From the practical point of dealing in the Stock Exchange, the two most important factors are the ending of fixed commissions and the possibility of single capacity. The Stock Exchange has undertaken to abolish minimum commissions by 1986, but it is likely that these will end very much sooner than that. In fact, as the noble Lord the Minister said, the first steps are already being taken. It is now thought that the so-called "big hang", where all fixed commissions end on one day, may take place fairly shortly.

The single most important factor recently was the total removal of exchange controls in 1979. One of the effects of that is that a company such as ICI now has some 15 per cent. of its shares held in the form of American depository receipts in New York, traded on the New York market; and, of course, British investors can deal direct with American brokers on Wall Street, subject to negotiated commissions. That, plus the enormous improvement in communications, means that we are now all part of a global market providing a 24-hour service.

The question is: where will commission rates end? At the moment, big institutional deals in equities in this country probably attract a lower rate of commission than those negotiated in New York. In the gilt edged market, short gilts—that is, those up to 15 years—which account for 35 per cent. of the total Stock Exchange turnover, already have fully negotiated commissions. In the long end of the gilt market, which accounts for about 38 per cent. of the total Stock Exchange turnover, these commissions look as if they might fall fairly sharply, particularly on the larger orders. This may well not be before time, but I think that market forces would have forced it to happen fairly soon anyway.

It is worth reminding your Lordships that perhaps the biggest gainer on Stock Exchange dealings is the Chancellor. He takes 2 per cent. stamp duty, then he takes VAT on commissions and, if one is lucky enough to make a profit, there is capital gains tax to pay on that. The removal of the 2 per cent. stamp duty would be a marvellous step and would prove that this Government are in favour of wider share ownership.

Where will negotiated commissions lead us? Perhaps they will lead us to fewer, leaner broking firms; perhaps even to the small investor paying more commission, though I hope not. But will they lead to the disappearance of single capacity—the separation of principal and agent? The Government do not want to see this and it is the Government who hold the key' as to whether this could happen: first, by the operation of the stamp duty privileges given to jobbers, whereby they are allowed to hold stock over an account paying only a nominal amount of stamp duty in the equity market; and, secondly, in the gilt edged market by access to the Government Broker. No market maker in either market could survive without those two privileges.

At the moment, the single capacity system seems to work very well. The broker goes into the market on behalf of his client. He can check his price with one of several jobbers and find the best deal to suit his client. He makes only his commission. The jobber hopes to make a profit out of the deal and the client gets the best available price while, at the same time, maintaining his confidentiality. The jobbing system in London makes us one of the few markets in the world where you can always get a price to deal in a reasonable number of shares, because bargains do not have to be matched.

The arrangements between the Secretary of State and the chairman which led to this Bill have attracted certain criticism, but I would remind the noble Lord, Lord Bruce, that our motto in the Stock Exchange is "My word is my bond" and, if we have said that we will deliver the goods, I am sure that we shall. One positive factor, however, is the seemingly sudden recognition by certain opponents of the City of the value of the Stock Exchange in the funding of Government debt, in finding new capital for industry and, not least, in the overseas earnings of Stock Exchange firms. Under the threat of the court, no changes which might have prejudiced our case have really been possible. I hope that we can now adapt ourselves to the future and that the uncertainty will be over. I also hope that this House will support the Bill and will wish an important national institution well for the future.