A national stock exchange seemed an enduring idea at the time, writes Stephen Mills National Market, National Interest By Edna Carew Allen & Unwin, 512pp, $ 60
THE idea of Melbourne and Sydney operating separate stock exchanges seems wonderfully quaint and parochial these days, as fussily impractical perhaps as tracking stock prices with chalk on a blackboard. Yet in the 1970s and ’ 80s that was the reality of share trading in Australia, along with fixed rate brokerage, paper share certificates lost in chaotic back offices, an entrenched culture of insider trading and selective disclosure. Every share transaction was taxed.
There were six capital city exchanges, all owned by local brokers, and their inefficiency and lack of scale offered the lure of price arbitrage for anyone smart enough to exploit it.
For one Perth investor in 1970, enough was enough. As Edna Carew tells it in National Market, National Interest , her history of the Australian Stock Exchange, Max Anderson sold his Poseidon shares at $ 1.50 on the back of pessimistic drilling reports from the company, only to see them hit $ 200 shortly after. His letter of complaint to then Opposition senator Lionel Murphy triggered a chain of events that led to the market structures we have today.
Carew’s account of those events coincides with the 20th anniversary of the merger of the six exchanges into the ASX in 1987 and the introduction of the electronic Stock Exchange Automated Trading System. Eleven years later, the brokers ceded control of the company when the ASX demutualised and, in a world first, became a company listed on its own main board.
Carew’s saga is three stories rolled into one. There is the political story of how the regulators achieved national uniformity for corporations and forced brokers under the reform thumb of the Trade Practices Act. There is the technology story of the crowded trading floors and chalkboards phased out by the electronic handshake of automatic trading and clearing, enabling vast increases in volume and product diversification. And there is the federal story of how national consciousness prevailed over parochial tradition to create a national exchange, accompanied, in a typically Australian way, by squabbling and the occasional dummy spit about where the head- quarters would be and who would be chairman.
This is not an official history of the ASX but it is a close collaboration. The ASX secured funding and provided archival and research assistance. By way of disclaimer, I must record that, as the then corporate affairs manager for the ASX, I had a hand in bringing it into being. But the finished product is very much Carew’s work.
As a former journalist and a prolific author, Carew conducted more than 100 interviews to produce a book rich in anecdote and narrative drive, with a jostling cast of supporting players. There is Michael McAllister, former private secretary to the duke of Windsor, with his drink coasters made from uncashed casino chips; he became the role model for Trevor Sykes’s glib Pierpont column. Hugh Morgan makes a decisive appearance telling a meeting of executives from the state exchanges they were not going home without approving the creation of a national exchange. Bruce Bond developed investor education in the late ’ 60s by lecturing the passengers on board P& O cruises. Ronald Coppel, the reticent hero of Carew’s story, managed the merger process from start to finish, applying a dedicated work ethic and modest reserve to resolve the many legal, organisational and risk management issues underpinning the new ASX.
The book is stronger on the ancient history, the events of the ’ 70s to 1998, than it is on the postdemutualised ASX. This is an inherent trait of corporate history. The closer you get to the present, the harder it is to detect the significant events among the merely interesting; also, con- temporary players are more reticent than retirees.
In Carew’s last chapter, the ASX would not stand still long enough for her to write finis. A new chief executive was appointed; a merger with the Sydney Futures Exchange was begun; then suddenly the board removed the chief executive. New photographs were ordered, new names indexed and new paragraphs added.
Side by side with this decades- long emergence of the national exchange, the broking industry underwent its own evolution, subject to ever increasing domestic and international competition. Veteran Sydney broker Jim Bain tells some of this story in A Financial Tale of Two Cities, his account of the main players in stockbroking, banking and merchant banking in Melbourne and Sydney.
Bain plays a big role in Carew’s book as the father of electronic trading and a key supporter of a national exchange. As chairman of the Sydney exchange in 1986, he issued the challenge: ‘‘ It is no longer Sydney v Melbourne but Australia v the world.’’ Bain’s book is cast as a contest for financial supremacy between these two cities, with Melbourne’s century- plus dominance succumbing to Sydney by the end of the ’ 60s on the tide of financial diversification, technological change and global competition.
Of course those very factors are what made the Melbourne v Sydney contest an irrelevancy, at least in terms of ownership and control. All the great broking firms of Melbourne and Sydney have since been bought up by US or European banks. As Bain notes sadly, ‘‘ This wasn’t the way it was supposed to turn out.’’
With the merger of the New York Stock Exchange with the European mega- exchange Euronext, and the London Exchange gradually succumbing to Nasdaq, it is likely that a standalone Australian exchange will look just as quaint and parochial in 20 years as its Melbourne and Sydney forebears do now. This, too, may not be how it was supposed to turn out. Stephen Mills is the author of The Hawke Years: The Story from the Inside and the former general manager, corporate relations, of the ASX.
Wonderfully quaint and parochial: Traders in full flight on the floor of the old Sydney stock exchange