Unfair to give LSE a rough ride
The London Stock Exchange and Clara Furse, its chief executive, have been getting a rough ride recently. LSE shares have come down heavily this year, and remain a target for short-selling while the management team is accused of lacking a strategy.
Closer to the truth is that management has a perfectly clear strategy but the critics don't like it. The critics' strategy was to sell the Exchange to the highest bidder. Furse's idea is to make its technology, regulation and reputation second to none so that it becomes the natural destination for home and international companies seeking to raise capital. Yesterday's profit figures, which were much better than people expected, ought to earn her the benefit of the doubt.
They won't, of course, because the critics also bemoan the fact that the LSE does not own an equivalent heavyweight futures exchange, a legacy of it failing to land Liffe several years ago though it was the highest bid at the time. But in truth the winner, Euronext, does not seem to have derived any great benefit from its ownership of Liffe in terms of finding ways to integrate an offering to customers that they could not get from them being separate and the LSE has not been massively hampered without it.
They are different businesses, after all - futures being about risk management and stock markets about capital allocation. There is no need for joint ownership for equity derivatives to reference to a stock exchange-listed price - and such activity is a major part of the LSE's business - but it does require a technologically advanced market.
The third line of attack says that the Exchange will suffer as rival trading platforms are launched. Perhaps it might - Chi-X certainly seems to have made some inroads at the top end, and Plus Markets a bit of progress among the small caps, but thus far the damage is minor.
Users of the new information service Markit Boat are also finding that fragmentation of information services can raise as many problems as its solves. The fact is that there is a lot more to running a successful exchange and getting market share than simply building a black box to display the prices and match the trades - as all the black-box builders in the US found to their cost even when they were up against a far less sophisticated competitor than they have in London.
Deutsche Bˆrse said at its annual meeting in Frankfurt this week that it was not particularly worried by the threat of new competition. If it isn't, London has even less reason to be. It is new arrivals such as Turquoise (when it is launched) that will have it all to prove.
That does not mean LSE shares are going to climb back to the giddy heights of 12 months ago anytime soon because the valuation of exchanges has tumbled in line with shares across the financial sector. But it is far and away the most powerful stock exchange in Europe, and one of the world's top three. There is no need to rush into anything.
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Electronic move worth backing
APCIMS, the stockbroking and fund management trade association, issued a note today, urging the fund management industry to support a move to bring electronic settlement to the mutual fund business - just as Crest settles share transactions.
It is astonishing this is still an issue, given how important it is. It would be a huge help to unit-trust customers and their advisers to be able to buy and sell the funds as simply as they buy and sell shares, and it is a facility which has been shamefully long in the coming.
It would be doubly shameful not to back the project now.
Danger in too much Tory aid
Attendance at City cocktail parties and fundraisers in aid of the Conservative Party has soared in recent months, and will no doubt get a further boost from yesterday's by-election result, but a regular attendee makes the point that there is a downside.
The Labour Party, as everyone knows, is desperately short of cash - so much so that it is struggling to repay the loans to the raft of businessmen brought in by Lord Levy to help it out of its early troubles. There is certainly no money to fight an election.
The danger if the Tories mop up all the business support is it will leave Labour nowhere to turn to but the unions - and the theory is they would exact a high price in terms of commitment to a detailed trade union-dominated policy agenda in return for financial support.
So, my businessman informant said, he would donate to Labour as insurance to keep it out of the hands of the unions - and he hoped others would too.
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