London Stock Exchange Group plc
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| London Stock Exchange | |
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| Founded | 1801 |
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| Headquarters | London |
| Key People | Xavier Rolet, Chief Executive |
| Products | Cash equities, futures and options, debt, covered warrants, ETFs, reits, fixed interest, CFDs and depositary receipts |
| Corporate Website | www.londonstockexchange.com |
London Stock Exchange Group plc (LSE) is the United Kingdom's primary stock exchange. The LSE, which is itself publicly traded, provides markets that facilitate the raising of capital and the trading of corporate securities, access to a trading environment, as well as real-time pricing and reference information services worldwide. The business was enlarged by the 2007 acquisition of Borsa Italiana, which added futures and options to its product mix.[1]
The LSE was ranked as the 24th-largest derivatives exchange in 2010 according to the annual volume survey published by the Futures Industry Association (FIA) in March 2011.[2] The report states that the volume traded on the exchange decreased by 1.3 percent from the previous year. The total number of futures and options traded in 2010 fell to about 76.5 million contracts, from 2009's total volume of 77.5 million.
Contents |
History
The LSE traces its roots to the stock trading started in coffee houses in London in the late 17th century, which evolved into the opening of the first regulated exchange on March 3, 1801. The exchange amalgamated with 12 regional bourses in 1973 – the year in which female members were admitted for the first time – before the the modern form of the LSE was established with market deregulation in 1986. The so-called “Big Bang” ended the separation of brokers and dealers, opened membership to outside companies and shifted trading from the floor to dealing rooms. The LSE was established as a private limited company.
The Alternative Investment Market was launched in 1985, providing a listing venue for smaller companies, and the Stock Exchange Electronic Trading Service (Sets) and Crest settlement operations started in 1987. Shareholders voted in favor of a stock market listing in 2000, and the LSE listed on its own main board in July 2001.[3]
The LSE has been at the forefront of consolidation in the global exchange sector, successfully fending off a series of hostile takeover bids. The battle started on Dec. 14, 2004, with an unsolicited 530p-a-share offer from Deutsche Börse which, like subsequent proposals, was rejected by management as undervaluing the company. The LSE introduced a raft of shareholder-friendly measures as part of its defenses, including borrowing to finance a series of share buybacks, cost-control measures and the delivery on time and to budget a new, high-speed share trading platform.[4]
The LSE then considered tentative offers from Euronext and saw off a hostile bid from a consortium led by Australia's Macquarie Bank – launched on Dec. 15, 2005 and valued at 580p-a-share in cash – before embarking on a year-long defense against offers from the Nasdaq. The U.S. exchange made an indicative 950p-a-share offer on March 3, 2006, which was swiftly rejected by the LSE and withdrawn on March 30, 2006. Nasdaq started acquiring LSE stock on Apr. 12, 2006, building a 14.99-percent stake at 1,175p a share, adding a further 3.8 percent on May 3 at 1,218p and 5.4 percent at 1,248p in November. Nasdaq tabled a £2.9 billion indicative offer on Nov. 20, 2006 valued at 1,243p per share, with the U.S. exchange boosting its stake from 24.1 percent to 28.75 percent. The LSE continued to reject the offer and rejected discussions with Nasdaq executives. The offer expired on Feb. 10, 2007.
Freed from the Nasdaq pursuit – though the U.S. exchange remained its largest shareholder – the LSE confirmed on June 20, 2007 that it was in advanced talks to acquire Borsa Italiana.[5] The LSE and Borsa Italiana announced a merger agreement on June 23, 2007, with an all-stock offer of 4.9 LSE shares for each share in its Italian partner, valuing the deal at €1.6 billion, with a price/earnings ratio of 27 times 2007 earnings. LSE shareholders received 72 percent of the combined group.
During 2007, 212 million electronic equity trades, with a combined value of £3.2 trillion (€4.7 trillion), were carried out on the cash markets of Borsa Italiana and the LSE. The average daily number of trades over the year increased 55 percent on 2006 to 839,244, while the average daily value traded grew 41 percent to £12.8 billion (€18.6 billion).
The latest chapter saw the LSE caught up in the three-way takeover battle for OMX between the Nasdaq, Borse Dubai and the Qatar Investment Authority (QIA). Borse Dubai and the U.S. exchange subsequently teamed up with a joint offer, while the QIA bowed out in December 2007. The proposed deal closed in early 2008 and saw Borse Dubai acquire OMX and then transfer it to Nasdaq in return for a 19.9-percent stake in a new combined company as well as Nasdaq's 28-percent stake in LSE.[6] The QIA has a 14.9 percent stake in the LSE.
EDX London, which trades derivatives on Russian and Nordic markets, became a wholly owned subsidiary of the London Stock Exchange in December 2008. In 2007, the total number of derivatives contracts traded across EDX and IDEM increased 32 percent on 2006 to a total of 79.9 million, while the notional value traded grew 45 percent to £1.5 trillion (€2.2 trillion).
In late June 2009, the LSE said it would cut jobs - the first sign of restructuring the 208-year-old bourse since Xavier Rolet took over as chief executive. The cuts were expected to result in around 60 staff losses in London and further cuts in Italy at the group’s Borsa Italiana unit. As of early summer 2009, the LSE group employed a total of 1,135 staff, split between 570 in the UK and 565 in Italy.[7]
In July 2009, it was reported that the London Stock Exchange was in talks with the European Multilateral Clearing Facility (EMCF) about the possibility of taking a stake in the venture.[8]
In December 2009, the London Stock Exchange announced a deal to acquire Turquoise, which had been a rival of the exchange.[9] On July 13, 2010, LSE named Pinar Emirdag, a former Turquoise board member and a key figure in its development, as head of professional business development. The addition came as the bourse sought to lure back customers from new rivals, such as MTFs Bats Europe and Chi-X Europe Ltd.[10] Emirdag would be responsible for developing relations and business with the wholesale market including investment banks, brokers and high-frequency traders.
In early August 2010, Turquoise CEO David Lester said in a Financial Times interview that Turquoise would be among the platforms that LSE uses for pan-European derivatives expansion. "We are still working it through with the shareholders of Turquoise in terms of what the build-out would look like," Lester said in the interview.
Turquoise offered trading in nearly 2,000 securities across Europe, including Czech and Hungarian shares. Since April 2010, it has also offered trading in 175 US-listed securities. As of August 2010, it claims a 4 percent to 5 percent market share in pan-European stocks. The LSE already has a small Nordic and Russian derivatives business called EDX. Lester also said Turquoise could use the Sola derivatives trading system that the LSE recently licensed from TMX Group, operator of the Montreal Derivatives Exchange and Toronto Stock Exchange. [11]
In late August 2010, Rolet announced he was stepping down from the board of LCH.Clearnet in a move observers said is the latest sign that the exchange is distancing itself from its long-time clearing house and taking a step closer to creating its own clearing business. The LSE did not have any shares in LCH.Clearnet at that time. The LSE was an exception among its global peers, such as Eurex and NYSE Liffe in not having a fully integrated clearing house for equities and derivatives.[12]
The LSE announced a proposed merger with TMX in February 2011. TMX shareholders were due to vote on the LSE merger proposal on June 30, 2011, with a two-thirds majority required for approval.[13] TMX Group Inc. and London Stock Exchange Group PLC terminated a trans-Atlantic tie-up on June 29, 2011, saying in a press release that they had determined they would not receive enough shareholder support to complete the transaction.[14]
On March 9, 2012, the London Stock Exchange announced that it would take a majority stake in LCH.Clearnet in a deal worth as much as €463 million.[15]
Product Development
On Feb. 3, 2009, the LSE said it would push ahead with its delayed Baikal pan-European trading system alone after previous partner Lehman Brothers Holdings Inc. went bankrupt. The LSE said it would take sole responsibility for Baikal, though the exchange would look for “strategic investors” in the long term. The so-called dark pool, named after the world’s deepest lake, would match orders anonymously and would not publish quotes. Baikal was part of LSE’s response to competition from Turquoise, Chi-X Europe Ltd., Bats Trading Inc. and Nasdaq OMX Group Inc., who wanted to wrest market share from traditional bourses.[16]
In April 2009, Baikal, the LSE’s planned pan-European dark pool multilateral trading facility (MTF) and liquidity aggregation service, announced it had partnered with Fidessa.
On July 15, 2008, the LSE announced the launch of the UnaVista Broker Matching Utility (BMU), a new service for the central matching of post-trade data across prime brokers, executing brokers and hedge funds. The BMU service runs on UnaVista, the LSE’s Web-based matching, reconciliation and data integration service hosted at the exchange’s data center.
In mid-June 2009, the LSE responded to rivals Turquoise and BATS Europe by cutting tick sizes for 14 companies on the FTSE 100 Index.[17]
On Dec. 9, 2009, Bloomberg News reported that the LSE Group was planning to offer futures and options based on the FTSE 100 Index, in competition with NYSE Euronext's Liffe futures market. The bulk of FTSE 100 index stocks were traded on the LSE. [18]
Beginning on Aug. 2, 2010, the LSE began offering a pricing promotion to encourage private client brokers to offer customers the ability to direct their business straight onto the exchange’s order books. It was the latest in a series of measures designed to allow private investors to participate more directly, including through Direct Market Access (DMA), and to increase liquidity overall. Private client brokers could sign up for the new pricing scheme and benefit from six months of free trading when they directed clients’ orders straight through to the exchange’s order books, followed by a special lower charge of 0.10 bps for those orders. This was a more than 75-percent discount on the typical 0.45 bps charge under the tariff at that time. [19]
Key People
- Chris Gibson-Smith, Chairman
- Xavier Rolet, CEO
- Doug Webb, Chief Financial Officer
- David Lester, Director of Information Services
- Raffaele Jerusalmi, Executive Director, CEO of Borsa Italiana; Director of Capital Markets
- Tony Weeresinghe, Head of Global Development
- Kevin Milne, Director of Post Trade
- Antoine Shagoury, Chief Information Officer
- Denzil Jenkins, Head of Compliance and Regulation, effective in early 2012[20]
References
- ↑ London Stock Exchange Group PLC. Bloomberg.
- ↑ 2010 Annual Volume Survey. Futures Industry.org.
- ↑ History. LSE.
- ↑ LSE prepares for freedom from Nasdaq bid. Financial Times.
- ↑ LSE in talks with Borsa Italiana. Financial Times.
- ↑ Qatar bows out of OMX battle. Financial Times.
- ↑ New Chief Rolet Wields Axe At LSE. Financial Times.
- ↑ LSE In Talks With EMCF Over Stake. Nasdaq OMX.
- ↑ LSE Unveils Turquoise Acquisition. MSN Money UK.
- ↑ LSE Hires Emirdag as Head of Professional Business Development. Bloomberg.
- ↑ LSE’s Turquoise heading into profit. Financial Times.
- ↑ LSE’s Rolet quits board of LCH.Clearnet. Financial Times.
- ↑ LSE offer for TMX receives boost. The Financial Times.
- ↑ TMX, LSE Terminate Merger Deal. WSJ.com.
- ↑ LSE agrees terms of stake in LCH.Clearnet. Financial Times.
- ↑ LSE Will Press On With ‘Dark Pool’ Without Partner. Bloomberg.
- ↑ LSE Cuts Tick Sizes in Battle With Turquoise, Bats. Bloomberg.
- ↑ LSE Plans FTSE 100 Derivatives, Challenging Liffe. Bloomberg.
- ↑ London Stock Exchange to add new private investor promotion. LSE.
- ↑ LSE appoints Chi-X Europe's Denzil Jenkins head, compliance and regulation. Finextra.
