Group warns of market break-up

A NEW CITY pressure group warned yesterday that London's stock market faced possible break-up because dealing in the shares of small companies was becoming more difficult.

The City Group for Smaller Companies, Cisco, has been formed by 17 advisory and trading firms to campaign on key problems affecting the UK smaller companies market.

Cisco said that problems were 'discouraging investment and made the stock market less attractive as a source of finance for growing companies'.

Andrew Beeson, its chairman, warned that the Stock Exchange could face a challenge from new competitors - leading to the market's fragmentation.

Possible rivals include Nasdaq, the American over-the-counter market, and Tradepoint, a new screen-based dealing system, which is planning to go live next summer. It would provide a new facility as an alternative to the exchange's own system for use by professional investors.

Cisco said that small companies made up the vast majority of companies quoted on the stock market. Over 1,500 of the 2,100 listed companies have a market value of less than pounds 50m.

The group said there was a need for a new junior-level stock market to replace the Unlisted Securities Market, which is expected to be abolished soon.

However, the campaigners say that the exchange needs to set up a new, second-division market with easier regulatory and reporting standards for small companies.

Marc Cramsie, a merchant banker, said: 'There is a need for a capital-raising market which has a less rigorous class test than the main market.'

The move would also make it easier for small companies to seek a flotation and make acquisitions, he added.

The group aims to attract about 200 members and also wants quoted companies to join. Current members include Beeson Gregory, the brokers, Winterflood Securities, the market-makers, Framlington, the fund managers, and 3i, the venture capital group.