HL Deb 16 November 1987 vol 490 cc6-8

2.52 p.m.

Lord Peston

My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government whether they are satisfied that all investors are able to deal properly in the current volatile securities markets and, if not, what measures they propose to take.

The Secretary of State for Trade and Industry (Lord Young of Graffham)

My Lords, I have no reason to believe that investors have been unable to deal properly. The International Stock Exchange considers that its central systems have coped well with exceptionally heavy volumes of trading.

Lord Peston

My Lords, I thank the noble Lord for that Answer. Is he aware that, in the early days of the crash, unit trusts apparently were not marketable and small savers investing in them were unable to sell them? Does he regard that as a satisfactory state of affairs?

Lord Young of Graffham

My Lords, I am not aware that any real problems occurred on the first day or two of the recent drop in Stock Exchange prices. The International Stock Exchange itself is investigating some allegations that market makers were refusing to answer their telephones. So far, there is no firm evidence of that actually occurring.

Lord Williams of Elvel

My Lords, if there is to be wider share ownership, is it not a fundamental condition that all investors, and particulary small investors, should be able to deal properly and at the appropriate time? Is there anything in the Financial Services Act or the subsequent regulations issued by the Securities and Investments Board or any self-regulating organisation which requires market makers to make a market at all appropriate times and not to leave their telephones off the hook?

Lord Young of Graffham

My Lords, I am grateful to the noble Lord, Lord Williams. However, let me suggest to the noble Lord, with all due humility, that the International Stock Exchange has said that there is no firm evidence that anyone refused to answer telephones. The responsibility for handling the Stock Exchange is a matter for the International Stock Exchange itself. It was coping with unprecedentedly high levels of trading—about 100,000 bargains per day. There is no evidence and no real complaint now that the market was not an ordinary market. Indeed, the London market seems to have coped far better than other international stock exchanges.

Lord Nugent of Guildford

My Lords, is my noble friend aware that in the Big Bang, which swept away the old system of stockbrokers and jobbers, we may have lost something which was valuable? I refer particuarly to the safeguards in the dealings of small investors. Will the Minister say whether he thinks that on balance the new system, which gives greater competitiveness in the international dealing market for big deals, has turned out to be for the benefit of the country?

Lord Young of Graffham

My Lords, London is one of the two major international stock exchanges in the world today. I have little doubt that the old system of jobbers would have had the greatest possible difficulty in dealing with the circumstances of the last few weeks. However, that is an academic question. If we had not changed, I suspect that London would not be one of the two major financial centres of the world.

Lord Williams of Elvel

My Lords, I rise again to ask the Minister to request the International Securities Association to look a bit harder for evidence concerning telephones left off the hook. There were numerous complaints. I know people who tried to deal personally and institutionally who were unable to do so.

Lord Young of Graffham

My Lords, it is not for me to institute a witch hunt. If members of the public have complaints, they should take those matters up with either the International Stock Exchange or the TSA. I am sure that some of the Members of this House will remember that two or three weeks ago, before the financial storm, we had another kind of storm. London suffered some damage at that time. It is pure conjecture, but there may well have been some delays in telephone calls at that time. We are looking for evidence that market makers were refusing to answer their telephones. That is a very different matter from an inability to get through on telephones. At the moment, I have no evidence on either of those matters.

Lord Peston

My Lords, will the noble Lord clarify one aspect of his Answer? Is he saying that, even if it were possible to establish that some shares were not marketable in one way or another, the Government regard themselves as having no responsibility in that area whatever?

Lord Young of Graffham

My Lords, the primary responsibility to ensure that there is orderly trading in the market belongs to the International Stock Exchange. If we found that there were periods when that did not happen and there was a breakdown—and all noble Lords will be cognizant that there was a breakdown in orderly trading in every other international exchange in that particular period—then I should surely look into the position.