London Stock Exchange Group
|London Stock Exchange|
|Key People||Xavier Rolet, Chief Executive|
|Products||Cash equities, futures and options, debt, covered warrants, ETFs, reits, fixed interest, CFDs and depositary receipts|
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London Stock Exchange Group (LSE Group) is an international exchange group that operates a range of international equity, bond and derivatives markets, including the London Stock Exchange plc; Borsa Italiana; MTS, the European fixed income market; and Turquoise, the pan-European equities platform. The London Stock Exchange 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 2007 acquisition of Borsa Italiana added futures and options to its product mix.
LSE Group is also a leader in clearing and settlement of securities, with a majority stake in LCH.Clearnet, the global central counterparty clearing operator, as well as wholly-owned subsidiaries CC&G, the Italian clearing house; Monte Titoli, the European settlement business; and globeSettle, a Luxembourg-based central securities depository launched in 2014.
The group also operates index, data and analytics platforms including FTSE Russell Indexes, SEDOL, UnaVista, Proquote and RNS. LSE also operates MillenniumIT, a technology platform LSE bought in 2009, and which forms the basis of LSE’s trading system.
LSE Group is headquartered in London, with operations in North America, Italy, France and Sri Lanka. As of 2015, the group employed over 4700 people.
In 2015, the exchange's Borsa Italiana and Turquoise Derivatives markets was ranked 31st among global derivatives markets, according to the Futures Industry Association's annual volume survey. The two exchanges posted a combined volume of 48.8 million contracts traded, down 3.2 percent from a year earlier when it posted 50.4 million contracts traded.
The Early Years
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.
The Transition - Public Listing and Industry Consolidation
Shareholders voted in favor of a stock market listing in 2000, and the LSE listed on its own main board in July 2001.
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.
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 acquired Borsa Italiana in June of 2007, in a deal valued at €1.6 billion. LSE shareholders received 72 percent of the combined group.
The winter of 2007 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. Borse Dubai acquired OMX in early 2008 and then transfered 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. 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).
The Rolet Era - Restructuring and Growth
In March 2009, Xavier Rolet was named to LSE's board, and two months later was named its new CEO, replacing Clara Furse. One month later, in 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. At that time, the group employed a total of 1,135 staff, split between 570 in the UK and 565 in Italy.
LSE acquired a 51 percent stake in Turquoise, a former rival, in February of 2010, and in July of 2013, LSE increased its stake by purchasing Turquoise's derivatives platform.  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. Emirdag left the company in 2013.
In 2010, Rolet announced he was stepping down from the board of LCH.Clearnet, ultimately paving the way for LSE to take a majority stake in the clearinghouse. The LSE did not have any shares in LCH.Clearnet at that time, which made it an exception among its global peers in not having a fully integrated clearing house for equities and derivatives. LSE Group closed a €328 million cash deal with LCH.Clearnet in early 2013, leaving the exchange group with a 55 percent stake in the clearing house.
FTSE, Russell, and FTSE-Russell
LSE Group's involvement in the index business dates back to 1984, when the exchange began calculating the FTSE 100 Index for the Financial Times' parent company Pearson. The index team was spun off into a joint venture in 1995. In December 2011, LSE Group agreed to a £450 ($705 million) acquisition of Pearson's 50 percent ownership to become the sole owner of the index group.
In June 2014 the LSE agreed to buy The Frank Russell Company for £1.59 billion ($2.7 billion). The purchase was the largest one in the LSE's history and and gave it the opportunity to attract trading in securities and derivatives that track the Russell indices. It also brought together about $9 trillion of assets benchmarked globally and made LSE the No. 2 player in U.S.-listed exchange traded funds. The deal closed at the end of 2014.
In February 2015, LSE Group entered into a licensing agreement with CBOE to develop and list options based on existing FTSE and Russell Indices. Cash-settled options on the flagship Russell 2000 began trading on CBOE as of April 1, 2015, and in October 2015, the options exchange began offering options on other Russell index products including the Russell 1000 Index (RUI), the Russell 1000 Value Index (RLV) and the Russell 1000 Growth Index (RLG)
When the exchange group acquired Frank Russell, it also inherited Russell Investments, the firm's asset management division which held, at the time of acquisition, about $262 billion under management. Soon after the acquisition was completed, LSE Group put the asset management division up for sale. In October 2015, LSE agreed to a $1.15 billion cash sale to an investment group led by U.S. private equity group TA Associates.
A Look to the Future?
In October 2015, the exchange group announced the launch of a new derivatives exchange, CurveGlobal, which offers trading in interest rate products, including futures on short term interest rate (STIR) in Euribor and Short Sterling and long term interest rate (LTIR) futures in Bund, Bobl, Schatz and Gilts.
In November 2015, the group launched ELITE Connect, a platform that allows market participants such as public companies, investor relations professionals, institutional investors and brokers to make contact, hold meetings and share information online.
On December 22, 2015, LSEG announced it had acquired XTF Inc., a U.S. based provider of ETF data, analytics and ratings. LSEG will integrate the business into LSEG’s Information Services Division, which includes FTSE Russell, SEDOL, UnaVista and RNS.
On February 23, 2016, LSEG and Deutsche Börse Group announced they were in advanced talks to create a "merger of equals." This marked the third attempt by the two exchanges to merge, after failed attempts in 2001 and again in 2004. In July of 2016, LSEG shareholders voted in favor of the merger, in spite of the potential problems resulting from the decision of Britain to exit the EU. An overwhelming 99.89pc of voting shareholders supported the deal. Next, Deutsche Börse’s shareholders must approve of the deal and then it must win approval from several dozen competition authorities around the world.
On December 27, 2016, the Financial Times reported that The LSE Group would sell its French clearing arm, LCH, to Euronext in a cash deal worth about €510m, hoping to smooth the way for the Deutsche Börse merger. LSE offered to sell LCH SA, formerly known as Clearnet, in September 2016 to ease antitrust concerns. The LSE wants to keep the UK arm of LCH, which clears interest rate swaps, and link it with Deutsche Börse’s Eurex, which clears futures.
On March 9, 2017, the LSE announced it would launch an additional market, called the International Securities Market (ISM), for the issuance of primary debt targeted at institutional and professional investors. It will be a multilateral trading facility that will operate alongside LSE’s other markets. The launch of the ISM expected in Q2 2017, subject to regulatory approval.
- Donald Brydon, Chairman
- Xavier Rolet, CEO
- Nikhil Rathi, CEO, London Stock Exchange plc & Director of International Development
- David Warren, Chief Financial Officer
- Suneel Bakhshi, CEO, LCH.Clearnet
- David Lester, Group Director of Corporate Strategy
- Raffaele Jerusalmi, Executive Director, CEO of Borsa Italiana and Director of Capital Markets
- Antoine Shagoury, Group Chief Information Officer and Chief Operating Officer
|Year||Total Annual Derivatives Volume||Percent Change|