Lock, stock and two Exchange barrels

The London Stock Exchange is to launch a rival to Nasdaq. But I don't know whether to laugh or cry.

The initial inclination is to laugh - at the plight of the Exchange's fat cats who have largely ignored the needs of fledgling computer and software companies, forcing them to go abroad if they want a listing.

As anyone in the industry will know, it's bad enough trying to raise venture capital here, let alone float.

And thanks largely to the LSE's bureaucracy, any firm that wanted to make the quantum leap onto the LSE has had to put a quarter of its shares up for grabs, have a good profit record and agree to two-year lock-ins before raising capital through equity sales.

It's this red tape that the LSE would argue has protected shareholders and led to market stability in the past, but it misses the point - that time is of the essence for IT start-ups. On Nasdaq, by comparison, a company can go from zero turnover at flotation through to $100m in two years - hence the meteoric rise of internet companies, and the creation of countless dollar millionaires, many just out of college.

If the same whiz kids had instead been tempted to list on the LSE or even its slightly less onerous Alternative Investment Market (AIM), they'd still be filling out the registration forms.

What might also raise a hollow laugh about the LSE's belated attempt to rival Nasdaq is that it has done so only because of fears its own revenue might be under siege by online trading - in other words, by the very technology it has so miserably failed to support. Even today, you can't get real-time LSE prices via its website, largely because it would undermine the cosy coterie between the Exchange, its brokers and the financial news organisations disseminating LSE feed to subscribers.

In the US, free instant share price updates via the web has fostered an explosion in trading by the public, thus further helping IT entrepreneurs raise cash.

Nasdaq alone boasts some 5,000 companies with an aggregate capitalisation of some $3tn. Even if internet stocks do take a dive, it's difficult to see how the LSE can ever match this level of activity.

But then the smug pinstripes of the Exchange have never shown much liking for, or empathy with, IT.

The LSE's share settlement system of the early 90s, Taurus, was a disaster, while the successor system Crest - taken over by the Bank of England - has been similarly bedevilled by criticism that it's too expensive and unwieldy.

If the LSE and City can't even get their own IT infrastructures right, it begs the question of how they can provide the right trading environment for UK technology firms that know what they're doing.

The UK is awash with talent, particularly on the software front, but companies such as Autonomy and Dr Solomon's have had to resort to Nasdaq or its Brussels counterpart Easdaq, to make headway.

Perhaps we should save the Kleenex for the gents

at the LSE though. Before long, their need may be greater than those they failed to support.