Step back to Global
The Davos forum this week was celebrating “Globalisation 4.0” – the age of the fourth industrial revolution.
But commentators are, simultaneously, pointing towards the reality of “Deglobalisation” – defined as a process of diminishing interdependence and integration between nation states. Various actions by China and ructions in the telecom are cited.
This may be true to some observers and the conclusions they draw may be valid.
But the “globalisation” genie that was released years ago has become far to large to stuff back into its lantern.
Consider many companies with global brands. The company secretary of a major oil company said to me some years ago that they had a problem. Their brand was larger that any stock exchange on which they were listed; and they were listed on the biggest at the time.
Another confessed that they had shareholders in 140 markets and employee-shareholders in a good proportion of these. London-based rules, or even those of New York, were not drawn up for these situations. What happens when national rules clash? And they do. The answer from another global company was that in treating all shareholders as equal, they had to bear the costs of reconciling local rules with those of Head Quarters. Sometimes the cost involved actually had an effect on the market price.
Another example lies in voting. For many companies listed on European exchanges, local rules demand that the names, addresses and dates of birth of all investors coming on the register are collected. If that same company is also listed in the US, requesting some of that data is illegal.
The company is put into the position of choosing which rules to break. Alternatively, companies may be forced to shop around for more comfortable corporate bases – as a number of US companies have found in re-domiciling in Ireland, for example.
This may be one cause, of many, for the current trend of declining stock exchange listings.
Or maybe the time has come to consider “stateless” markets. Domestically focused stock exchanges would continue to operate in support and the service domestic issuers. But as soon as a company passed some “global” thresholds, they would be eligible to list on a stateless, super stock exchange.
Two precedents support the model: On one hand the continuing effectiveness of bodies like CPMI IOSCO which has set some effective benchmarks and recommendations for market structures worldwide and, it has to be said, the continuing global influence of the Bank for International Settlements.
Secondly, an Italian bond trading platform called Euro MTS deployed a similar market structure in Europe some 20 years ago whereby individual sovereign issuers – like the central banks of Belgium, France and Italy - issued Treasury bonds onto a nationally branded MTS platform. Once a bond issue achieved a certain size and liquidity it was elevated for trading on pan-European bond trading platform – EuroMTS.
It worked and changed the behaviours of market participants and issuers alike.
Technology is driving markets and the “global market Genie”. One of the best examples of how ineffective national attempts to coral and restrict cross-border capital markets was the emergence and growth of the Eurobond market (otherwise called Eurodollar market). That did not have the advantage of the Web and DLT supported markets that we have now.
Deglobalisation is doomed to failure because the alternative is so much more efficient.