But it would have spared the City unnecessary embarrassment as the Exchange lurched publicly from one

But it would have spared the City unnecessary embarrassment as the Exchange lurched publicly from one faux pas to another, mostly connected with its clumsy efforts to push ahead with a share dealing revolution without any clear idea of the backing for its plans.There was always plenty of evidence that big institutions wanted to see an order-driven facility for the big FT-SE stocks because they know it will cut their dealing costs. It might not have saved Michael Lawrence's job as chief executive, for there were so many disagreements that finally led to the cup of bile running over last week. Had the Stock Exchange the nous to ask the market some while ago what sort of share dealing innovations it actually wants, much grief could have been spared. In particular, it must tell them whether any savings would be passed on to consumers. They are hardly likely to negotiate if they suspect the savings will be used to intensify competition from British Gas in exploration and production.Stock Exchange should have asked the marketNice document, shame about the timing.

This is a matter between British Gas and its suppliers; the Government's role should be as a referee and no more.And if it wants to get its offshore suppliers to the negotiating table, it had better be a lot clearer about its own objectives. But with gas, and arguably telecommunications, it is considerably worse, and the shares have performed relatively badly. Indeed, the gas share price trend over the years shows how early the City grasped the scale of the risk.The idea of roping taxpayers and consumers into a rescue plan for gas, simply because there was more interference from the regulator than expected, is a case of ''heads I win, tails you lose'' and is not acceptable. Indeed, the prospectus spelt out the penalty for disobeying the regulator or ignoring the competition authorities, which was draconian - the loss of the monopoly.In the electricity and water privatisations, regulatory risk has proved far less severe than investors thought at the time of privatisation, and enormous profits have been made.

What changed after privatisation was the regulatory framework, and that happened because it was gradually realised that too little had been done to introduce competition into the industry.The prospectus made perfectly clear that British Gas was subject to a regulator - and at the time of the sale the financial risk of arbitrary actions by Ofgas was at the forefront of the debate in the City. Instead of 10 years' notice, British Gas was given little more than two years' warning of the pilot scheme for the introduction of competition in the domestic market, which is to begin in the South-west this spring.But, like much in the gas business, these claims should not be taken at face value. Worse still, open market gas prices also fell sharply, allowing new competitors to undercut by a wide margin.Given that this debacle was a result of government action, British Gas argues, why should shareholders bear all the pain? This is as clear a case of false prospectus as they come. Though 55 per cent of the contracts were agreed before 1986, the company went on buying, and the last three take-or-pay contracts were signed after 1991.The argument for a bail-out is quite simple: the Government, the Monopolies Commission, the Office of Fair Trading and the gas regulator changed the rules progressively between 1988 and 1993 to introduce greater competition. As a result, British Gas was faced with a falling market share which turned the take-or-pay contracts into a nightmare - an enormous liability because it could not sell enough gas to take all the contracted spplies.