London Stock Exchange Group plc

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London Stock Exchange
image:Lse_logo.gif
Founded 1801
Headquarters London
Key People Xavier Rolet, Chief Executive; Massimo Capuano, Deputy CEO
Products Cash equities, futures and options, debt, covered warrants, ETFs, reits, fixed interest, CFDs and depositary receipts
Web site www.londonstockexchange.com/en-gb/

London Stock Exchange Group plc is the United Kingdom's primary stock exchange. The LSE 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][2]

Contents

Structure and Regulation

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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).

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 the 2006 to a total of 79.9 million, while the notional value traded grew 45 percent to £1.5 trillion (€2.2 trillion).

In December of 2009, the London Stock Exchange announced a deal to acquire Turquoise, which had been a rival of the exchange.[1]

The battle for independence

The LSE has been at the forefront of consolidation in the global exchange sector, successfully fending off a series of hostile takeover bids and approaches starting in December 2004, before concluding its merger with Borsa Italiana in June 2007.

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 of a new, high-speed share trading platform.[2]

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 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 per cent on May 3 at 1,218p and 5.4 percent at 1,248p on November Nasdaq tabled a £2.9bn indicative offer on November 20, 2006 valued at 1,243p per share, with the US 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.[3]

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.[4]

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, which is subject to shareholder approval but expected to close in early 2008, will see 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.[5] The QIA has a 14.9 percent stake in the LSE.

In late June of 2009, the LSE it would cut jobs, the first sign of a restructuring of 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 of 2009, the LSE group employed a total of 1,135 staff, split between 570 in the UK and 565 in Italy.[6]

In July of 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.[7]

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.[8]

Product Development

On Feb. 3, 2009, LSE said it would push ahead with its delayed Baikal pan-European trading system alone after previous partner Lehman Brothers Holdings Inc. went bankrupt. 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 wouldn’t 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.[9]

In April of 2009, Baikal, the LSE’s planned pan-European dark pool multilateral trading facility (MTF) and liquidity aggregation service, announced it had partnered with Fidessa.[10]

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 London Stock Exchange’s Web-based matching, reconciliation and data integration service hosted at the exchange’s data center.[11]

In mid-June of 2009, the LSE responded to rivals Turquoise and BATS Europe by cutting tick sizes for 14 companies on the FTSE 100 Index.[12]

On December 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 are traded on the LSE. [13]

Key People

References

  1. ↑ LSE Unveils Turquoise Acquisition. Press Association. Retrieved on December 21, 2009.
  2. ↑ LSE prepares for freedom from Nasdaq bid. Financial Times. Retrieved on January 17, 2008.
  3. ↑ LSE in talks with Borsa Italiana. Financial Times. Retrieved on January 17, 2008.
  4. ↑ Press release. LSE. Retrieved on January 17, 2008.
  5. ↑ Qatar bows out of OMX battle. Financial Times. Retrieved on January 17, 2008.
  6. ↑ New Chief Rolet Wields Axe At LSE. Financial Times. Retrieved on June 26, 2009.
  7. ↑ LSE In Talks With EMCF Over Stake. Nasdaq OMX. Retrieved on July 14, 2009.
  8. ↑ History. LSE. Retrieved on January 17, 2008.
  9. ↑ LSE Will Press On With ‘Dark Pool’ Without Partner. Bloomberg. Retrieved on February 4, 2009.
  10. ↑ Press Release. Fidessa. Retrieved on April 21, 2009, 2009.
  11. ↑ Press Release. London Stock Exchange. Retrieved on July 16, 2008.
  12. ↑ LSE Cuts Tick Sizes in Battle With Turquoise, Bats. Bloomberg. Retrieved on June 18, 2009.
  13. ↑ LSE Plans FTSE 100 Derivatives, Challenging Liffe. Bloomberg. Retrieved on December 9, 2009.
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