The Irish Stock Exchange and Regulatory Change
Mulligan, Christina, IBAR
The Irish Stock Exchange separated from the International Stock Exchange of the United Kingdom and the Republic of Ireland Ltd in 1995, when the Central Bank of Ireland became the `Competent Authority' for regulation of the Exchange and its member firms. This paper investigates the implications of separation. The regulatory structure prior to separation is examined within the context of the Irish market. The new regulatory regime and its likely impact on investors and quoted companies is assessed through the medium of interview-based research. It is concluded that, owing to continuing association between the two exchanges, separation will have minimal impact on the then listed Irish companies. Whether large Irish companies of the future seek their primary listing in London as they strive to become world players is very likely to depend on the loyalty of the Irish domestic institutions to such companies.
The International Stock Exchange of the United Kingdom and the Republic of Ireland Ltd was formed in 1973 following the merger of the UK regional exchanges and the Irish Exchange, based in Dublin, with the London Stock Exchange. The link between Dublin and London ended in 1995 when, following implementation of the Investment Services Directive (Council of the European Communities 1993), Ireland appointed a `Competent Authority" -the Central Bank of Ireland2-to regulate the Irish Stock Exchange and its member firms. The objective of this paper is to investigate the likely impact of separation from London on the Irish market, Irish stockbroking firms and, ultimately, the Irish Stock Exchange. In 1994, interviews were conducted with the Irish Exchange, stockbroking firms in Dublin, Irish corporate financiers, and several UK institutional investors. The views of Irish institutional investors were expressed by the Irish Association of Investment Managers (IAIM). In addition, finance directors from two of Ireland's largest quoted companies were asked for their opinion on both the link with London and the impending separation. The purpose of the interviews was, in the first instance, to discuss the structure of the Irish market and the financing of Irish companies. The perception of the business community regarding the links between the Irish and London exchanges was investigated, along with opinions on how the new regulatory structure will serve the needs of the Irish market.
Prior to 1973, the Irish Stock Exchange, based in Dublin, was one of the regional exchanges of the then London Stock Exchange. In 1973, when all the regional exchanges were absorbed into the London operation, Dublin retained some independence. Whilst remaining an integral part of the International Stock Exchange of the United Kingdom and the Republic of Ireland Ltd, the Irish Exchange retained its ability to list securities and to trade in them. Securities could, therefore, be quoted in either or both London and Dublin. Most Irish companies were dual-listed on both the Irish and the London exchanges. Companies which chose to list in Ireland only, so called `Dublinlisted' companies usually had no market in their stock. Most Irish stockbrokers advised companies to choose a dual-listing as the additional costs were marginal. The regulatory structure governing the Irish Stock Exchange until 1995 dated back to 1988 when, as a result of the UK's Financial Services Act 1986, regulation of UK financial services changed radically (Wedgwood et al 1986; Whittaker and Morse 1987). The basic principle underlying the Act was self-regulation. It gave overall responsibility for the financial system to the UK Secretary of State for Trade and Industry who, in turn, delegates many powers to the Securities and Investment Board. One of the main functions of the Securities and Investment Board is to authorise others to carry on investment business, either directly, or through one of four self-regulatory organisations, of which the Securities and Futures Authority is one. …