Why the rush to liberalise stockbroking?

For the past three week The Malta Business Weekly has been reporting on the dispute between the stockbroking community and the Malta Stock Exchange regarding the liberalisation of stockbroking in Malta. As a newspaper that believes in free and fair competition, we can say that the principle of liberalising stockbroking is correct. However, once again the government might have the right idea but the way it is proposing to bring about such a liberalisation is wrong.

We were the first newspaper to report that the Malta Stock Exchange had proposed, in a meeting with stockbrokers on 14 June, that the government intended to liberalise the sector by 1 July. This was, of course, an absurd suggestion and was probably aimed at testing the waters and seeing what type of reactions would emerge.

Not surprisingly the reaction from the stockbrokers was one of shock and anger. Liberalisation of any sector is not something which is announced two weeks before it actually takes place. There has to be a reasonable timeframe in place in order for restructuring, mergers and other necessary changes to come about.

We also revealed that the stockbrokers had requested, in a letter to the chairman of the Malta Stock Exchange, that liberalisation be brought about after the country's referendum on EU membership and certainly not with immediate effect. This would seem to be a reasonable request and would mean that liberalisation could take place in about two years' time. As one stockbroker told The Malta Business Weekly last week: "Telecoms and exchange control will not be liberalised until end 2002. Why can't the same arrangement be made for stockbroking?" This is a very valid argument and the government would be well advised to keep this in mind. The government has never liberalised any sector overnight, so why should this be the case for stockbroking?

When complete financial liberalisation came about in both Britain and Japan in the 1980s and 1990s, this was announced at least two years before the sector was opened up to competition, and we are talking about countries whose financial sector has been established much longer than Malta's. After all, the Malta Stock Exchange was only set up in 1992. Before that, not a single equity was listed on the Exchange.

One sincerely hopes that the government's original suggestion for early liberalisation was not part of any behind the scene deal that it struck with the banking sector, or perhaps one bank in particular. We are sure that common sense will prevail and that the government was only airing all its possible options and trying to seek out the views of the local stockbrokers.

It is important, however, that when liberalisation does come about, certain standards remain in place. It is one thing getting financial advice from a licensed stockbroker; it is quite another seeking similar advice from a bank clerk who might have been sent on a crash course in stockbroking or financial management. The Malta Stock Exchange must therefore ensure that whoever is allowed to give financial advice is qualified to do so.

One complaint by the stockbroking community regards the fact that they have not been consulted regularly by the Malta Stock Exchange and that they were often kept in the dark over developments. "We have not even been informed whether the deputy chairman of the Malta Stock Exchange had resigned or not. We simply read in the press that a new deputy chairman had been appointed. Our previous committee had on a number of occasions tried to meet the directors of the Malta Stock Exchange but to no avail," one stockbroker told The Malta Business Weekly last week.

Dialogue is meant to be one of the hallmarks of this government. It should therefore put its words into practice. One cannot accept that such an important sector of the business community, stockbrokers, is kept in the dark by the Malta Stock Exchange. After all, the stockbrokers' annual contributions to the Exchange are an important source of revenue for the MSE, so they deserve to be consulted more regularly.

The Malta Business Weekly is in favour of liberalisation, but it must be done within a reasonable timeframe and after an extensive consultation process.