Paterson thinks there should be only one sharemarket

Press, 21 January 1982, Page 16

Paterson thinks there should be only one sharemarket

PA Wellington Plans by an Auckland man to set up a cut-price sharebroking service raised serious questions, the chairman of the Securities Commission (Mr Colin Paterson) said last night. He was commenting on the proposal of a former trader with Merril Lynch, the huge New York broking firm, Mr Stephen Lunn, to challenge the New Zealand Stock Exchange’s traditional monopoly on share trading. Mr Lunn says he is setting up a firm, Over The Counter Share Trading, Ltd, to give smaller people a better service by pruning brokerage rates.

On the first $5OOO, for example, Mr Lunn will charge-one per cent commis-

sion, against the 2.5 per cent charged by a members of the Stock Exchange Association. Mr Paterson said that in principle he was happy to see some competition. “But I'm not prepared to see an undisciplined market develop,’’ he said. “We can point the finger at the Stock Exchange Association in some respects. But they are trying, to work towards the establishment of an open honest market that we want to see.

“I’m not in favour of that activity being undermined by an unregulated market.

“On the other hand competition is a good thing,” said Mr Paterson, who added that the Stock Exchange had to earn the place as the monopoly market for securities.

“But I think there really should be only one market.” Mr Paterson said that last year’s paper from the Securities Commission on nominees said that a strong official market was seen as a principle objective. Mr Paterson said Mr Lunn's plans were an interesting development. It was understood that he held a sharebroker’s licence, which was all that was required in terms of the 1908 act.

“He’s perfectly entitled to deal in shares — and of course he isn’t the first to set out to trade in shares without being a member of the Stock Exchange Association. “But the Securities Commission is not really happy with that situation.

“I tend to think all people who deal in shares should be members of the Stock Exchange Association.” Mr Lunn was unavailable for interview yesterday but he told the National Business Review this week that his organisation could not be a member of the Stock Exchange. “We can’t be part of their casino because they won’t let

us join.” .He acknowledged that he was not part of the fidelity fund that protects the public from default by a broker.

The president of the Stock Exchange Association. Mr Martin Harriman, said last night it was a “bit” disturbing that someone was setting up what amounted to a rival stock exchange with a capital of only $lOOO.

Mr Harriman said he expected Mr Lunn’s activity to be discussed at the association's annual meeting next month. “Of course we’ve had these third market activities in plenty of other places overseas.”. But he said it seemed people trading through Mr Lunn’s firm would not have the financial security offered on their dealing by members of the Stock Exchange Association's fidelity fund.

And Mr Lunn could not set up a proper alternative exchange because he lacked the necessary seven members.

"We live in a free enterprise situation,” said Mr Harriman. “It’s really over to the public if they want to use his services."