Quote-driven service targets small caps

A new trading platform for companies listed on alternative exchanges has the
potential to improve liquidity of small cap stocks, according to Ofex owner Plus
Markets Group.

The new service, unveiled last week, will provide trading services in AIM and
small cap stocks on the London Stock Exchange.

The move from Ofex comes 18 months after the LSE introduced its Stock
Exchange Alternative Trading Service (SEATS), a hybrid between quote-driven
trading, where market makers quote stock prices, and an order-driven system,
where buy and sell orders are matched up electronically. AIM stocks and a number
of small cap companies currently trade on SEATS.

The change has disappointed several market makers and private client
stockbrokers, who prefer trading on a strictly quote-driven basis. Ofex has
reacted by creating the new trading platform called the PLUS service.

Speaking to Accountancy Age, Plus Markets Group chief executive
Simon Brickles said the service would help traders and create deeper liquidity
for small companies – a major concern for small cap FDs trying to attract more
investors and provide stable share-price growth.

‘The new service can provide added liquidity for small caps because a
quote-driven system favours less-liquid stocks,’ Brickles said. ‘A computerised
order book system works well for bigger stocks, but we are providing a wider

The PLUS service is also expected to be cheaper for dealers. On the LSE,
makers have to pay a trade reporting fee for each deal, but on Ofex no trade
reporting fees will be charged.

Roy Phillips, director of market making at brokers and advisers Hoodless
Brennan, said the hybrid system had sufficed during the current bull-market, but
could prove unsuitable in bearish conditions.

‘The PLUS service gives brokers choice and provides immediacy of execution,
which is more appropriate for smaller stocks,’ Phillips said.

Philip Secrett, corporate finance partner at Grant Thornton, however, was
concerned that the new platform could harm small-cap liquidity rather than help

‘The benefit of more trading platforms for small caps is questionable. The
liquidity of small stocks is already fragile and fragmenting that liquidity
across a number of markets may not be beneficial,’ Secrett said.

‘It’s a broad debate. The proof of the pudding will be in the eating.’


Eurotunnel moves to stabilise accounts for auditor, while analysts welcome
Sage’s results.


The group finance director of construction and building group
Wolseley, Stephen Webster, is positioned to soar into the top
10 of FTSE100 FD pay rankings. Webster saw his 2005 pay package breach the magic
million mark when it climbed nearly 60% to £1.08m. Figures from
Accountancy Age’s sister publication Financial
, based on its 2004 FD salary survey, indicate that Webster could
move above Andrew Lynch, Compass FD, and Martin Stewart from BSkyB when the 2005
pay rankings are compiled. Wolseley recorded an 11.2% increase in sales to
£11.3bn in 2005 and a 15.6% increase in profit before tax to £691.2m.

Shareholders in pharmaceutical giant AstraZeneca, which
releases third-quarter earnings today, will be watching for further news on the
future of the group’s chief financial officer Jon Symonds. Symonds lost the race
to replace former AstraZeneca CEO Sir Tom McKillop to David Brennan. Symonds, a
respected executive and chairman of the Hundred Group of Finance Directors, has
remained at AstraZeneca but rumours have suggested that he may move on. Ahead of
today’s results, analysts were expecting operating profits of $1.64bn (£928m) on
sales of $5.85bn.

Alan Thomson, the financial director of aerospace company Smiths
, saw his annual pay package climb from £743,000 to £950,000
during the year ended 31 July 2005. Thomson earned a salary of £423,000,
benefits of £36,000 and a £491,000 bonus. Thomson’s rise in earnings came as
Smiths Group reported an increase in sales from £2.73bn to £3bn, and an 18% rise
to £413m in pre-tax profits from continuing operations.

Analyst sentiment has remained positive for accounting software specialist
Sage after the release of its trading update for 30 September
year-end results. The FTSE100 software giant expects revenues for the year to
grow by 14% to £777m, with pre-tax profit climbing by 13% to £204m – both in
line with market expectations. Goldman Sachs said Sage was ‘well managed’ and
had a low execution risk, but expected competition to intensify in the long
term. Credit Suisse First Boston maintained an ‘outperform’ rating on the
company’s stock. Further details will be released when Sage’s preliminary
results are announced on 30 November.

Boots, which releases interim results today, will be facing
tough questions from investors on its forthcoming merger with AllianceUnichem.
KPMG and Deloitte, the respective auditors, will be waiting to see if there is
any further news on which firm will win the audit for the combined company
Alliance Boots.

Eurotunnel, the manager of the channel tunnel, is
showing signs of recovery. In March, the company’s auditors, KPMG and Mazars
& Gurard, were reluctant to sign off the accounts amid growing concern over
the company’s future. Last week, however, the group reported that third-quarter
operating revenues were up 1% to £140.8m, adding that restructuring had helped
the group align demand and capacity more efficiently.

Related reading