VSWE sees a future for itself

Those supporters are more broadly based than one might suspect. The VSE has developed into something much larger than a regional market. Not only does it spin off work for an army of geologists, lawyers, accountants and brokers, it has become a key element in British Columbia’s economic strategy for the future. And it has positioned itself to play an important role in the burgeoning Pacific Rim economy, an economy that is already counting down to the day in 1997 when Hong Kong will be absorbed politically into China.

What has lifted the VSE’s spirits is an explosion in trading focussed on the Eskay Creek play. Daily trading records were shattered during August, the busiest month in the exchange’s 82-year history. It now looks as though the retail investor — the lifeblood of the VSE — is returning to the market, and that can only mean good things for the exchange and for those who rely on it for their livelihood.

Only months ago it seemed as if the VSE was suffering from some lingering and possibly fatal malady. After being dealt a crippling blow by the 1987 market crash, the VSE was hit by a crumbling gold price and a general disinterest in mineral exploration.

Then, in May of this year, a journalist from Forbes, a high profile U.S. business magazine, took the opportunity to kick the exchange while it was down, so to speak, and wrote a scathing attack on the VSE as full of vitriol as it was void in sound research.

But that hurtful article proved to be a watershed for the exchange. It shook up the VSE’s members, those brokerage firms that own and operate the exchange.

“It created the environment for change,” says VSE Chairman Marty Reynolds, who was scheduled to take the helm of what must have appeared to be a sinking ship just two weeks after the infamous article was published. “There’s nothing wrong with a little bit of a boot.”

The exchange is well aware that the world doesn’t need another stock exchange that deals only with blue-chip stock issues. Yes, the VSE is trying to become a little less geared to gold, to diversify into more industrial stocks (about 75% of issues that trade on the VSE are mining stocks). And it has instituted a system of company classifications to distinguish between stages of economic development in an attempt to retain some of those listings that in the past have abandoned the VSE for The Toronto Stock Exchange when they grow beyond the venture capital stage.

But, with the backing of a tougher British Columbia Securities Commission, a more comprehensive securities act in the province and Vancouver’s designation by Ottawa as an international financial centre, the VSE sees itself providing a well-regulated venture capital market to the world — the venture capital Capital, as its advertisements proclaim.

“Nobody does it,” says VSE President Donald Hudson, explaining why he feels the VSE can find a niche in the evolving network of global finance.

The VSE has a good base in Canada, a strong presence in the U.S. (roughly 25% of its trading volume originates from south of the border) and now it is looking to the Pacific Rim to expand. Since May of 1987 it has had a full-time representative based in Honk Kong in an attempt to drum up business that might otherwise go to stock exchanges in Singapore or Australia.

The VSE still has some very difficult challenges ahead, as do all financial institutions as the 1990s approach. Its goals for the 1990s will not be easy to attain. But the VSE has made some very sound policy changes over the past few years, particularly since October, 1987, and it is finding a market niche for itself that could make it a global player in financial markets.

How far the exchange can progress toward its objectives remains to be seen, but one thing is certain: news of the VSE’s death earlier this year were greatly exaggerated.

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