A FRIENDLY POLEMIC Why I don't accept the unregulated market

Oh, dear MAKE, my good friend! You still haven't forgotten that I turned upside with a stick the counters of the money changers? It wasn't with them that I had a problem with. Haven't I paid enough for doing that?

Why did I not accept and support the idea of an unregulated trading system, based on nominative or bearer shares, materialized, which would be sold or bought freely, like agricultural plots of land or vouchers for the "Cash for clunkers", in the classifieds?

But where do I start? First of all I want to publicly apologize to you, in case this position of mine at the time ever caused you problems or inconveniences. As you well know me, I would never be capable of that. I am very sorry if the dirty and heavy boot of abuse and incompetence trampled your fingers. They weren't sent by me.

And now, let's return to our friendly polemic. I've told you then, but let's resume our argument.

We are in 1995's Romania. Remember that not even banknotes were secured. How could we have secured the materialized stocks to prevent them from being falsified? And who could have made the difference between the good and the bad ones? Bank clerks? Notaries? Do you think they would have done it for free or they would have added to the trading costs? As you well remember, even in the electronic system there have been some frauds of this kind after the control keys of the initial system were eliminated. How big a chaos could have resulted from the falsification of the shares? Remember the chaos on the RASDAQ, caused by the fact that the USAID refused to give it the ability to query the depository prior to the confirmation of the sale offer. But of the case where someone's shareholder certificates were stolen or they'd lost them?

How many commissions would have been paid to the notaries for the selling and buying of shares? But most of all, how and where we could have generated secure certificates for non-shareholders? What would have happened if someone only wanted to sell some of the shares they owned? Should we have printed secured certificates for each individual share? Think about the printing costs. Who would have borne those? Those poor shareholders that you decry for being ripped off by the brokers' commissions?

Who would have guaranteed to the shareholders that the potential buyer has the necessary funds to buy the shares? The bank? The cash in the bag? Who was going to run from the classifieds to the notary and who knows where else to be able to conclude a deal? The shareholders? Do you think that they would have been happier and more fulfilled? Do you think that they would have been better served by this system? I have great doubts!

Price discovery. This is a whole other can of worms. Where would the price been discovered? In the newspaper classifieds? Which newspaper? Wouldn't that have made every newspaper the BURSA of its own county or region? Which price would have been the fair one for the shares of Oltchim: the one from the BURSA newspaper of Râmnicu Vâlcea, Bucureşti, Constanţa, etc.? What could have stopped me from buying in the newspaper of Cluj and sell using the newspaper of Bucharest? Do you think that any seller in Cluj would have honored their promise to sell, once they found out that in Bucharest the same shares sell for a higher price? Do you think that any mutual fund or foreign investor would have ever tried to make sense of this system? They weren't that crazy to learn our accounting system, they would have been even less enthusiastic to learn our price discovery system. Where were the companies going to publish their achievements and failures? In every newspaper, in order to keep it fair, right? Paying for the same piece of news to be published who knows how many times? How many price corrections would this have caused? That number would have depended on what the people in each region of Romania made of the news. We would have also eliminated insider trading, because no one was going to believe in anyone and anything anyway.

I am sure that overwhelmed by such transparency and fairness, nothing could have stopped the State Property Fund (FPS), the Ministry of Finance and the Local Authorities from throwing massive blocks of shares and bonds at this market. To say nothing of line going around the block of companies looking for IPOs. And then, imagine all the short selling and margin trades going on. Unbelievable, unfathomable volumes. At microscopic prices, because with the brokers no longer charging outrageous fees, all the players involved in this simple, honest and transparent market would have provided free services. Furthermore, this allowed avoiding the frontrunning that these dishonest brokers had no shame in doing more than once. Most certainly, faced with this mass phenomenon, ROMGAZ would have realized that the place where to perform an IPO is here, rather than abroad. By the way has anybody gotten around to telling ROMGAZ that the foreign stock markets also have brokers?

Do you think, MAKE, my dear friend, that ROMGAZ is going with his IPO abroad because it believes that it over there it wouldn't have to face the complicated regulations of a regulated market, or that it expects to get a better price because there are no brokers?

Ah! I almost forgot! I think that this kind of market would have had an advantage! It would never have attracted a foreign prince!