BANKERS are increasingly worried that the London Stock Exchange Group is ignoring its home market to pursue international expansion plans in ways that are damaging the City.
With a dearth of new stock listings, a moribund FTSE 100 and big tech floats heading to New York, City insiders complain that the self-styled LSEG is not giving proper attention to London.
Some say it would be best if the exchange was spun out of the LSEG to a different owner.
While senior bankers are reluctant to publicly criticise an organisation they regard as too powerful to upset, the groundswell of opinion is rising.
Top City people are asking if the new LSEG – a worldwide seller of data to investors – is paying proper attention to the stock market, which is now only 4% of its revenues.
The LSEG, run by American former Goldman Sachs man David Schwimmer, insist it is to the advantage of the market to be part of a bigger group, and that it remains the premier European exchange.
Critics say the business is just too big to understand the needs of upstart, entrepreneurial companies that could boost the UK economy.
Others bankers say a new owner might be better. Over the last 20 years the exchange has fiercely fought off takeover bids from rival exchanges in Germany, the US and even Sweden.
The LSEG saw Microsoft taking a 4% stake in the business recently as a sign that it is an agile business building for the future.
To traditional London bankers it looked like another indicator that the company has forgotten its main purpose – to fund innovative new businesses and old ones in need of capital to expand.
One banker said of the internal culture: “The LSE is a staid institution that is terrible at innovating. Employees drift from meeting to meeting as if it's an extension of school. They claim to want to revolutionise London as a capital raising venue, but obsessively gaze into the rear-view mirror when deciding what success looks like.”
Alasdair Haynes who runs junior market Aquis Exchange said: “The LSE rebrand last year was interesting. It no longer wants to be seen as ‘London’ or even as just the “Stock Exchange” – but instead to focus on its international product and breadth of offerings. This could be a mistake similar to British Airways removing the Union Jack from their planes to be more international. Opening up for challenger Virgin to put the Union Jack onto its carriers to indicate that it was proud to be British.”
City old timer Richard Hunter of interactive investor said: “The ‘London’ part of the title ought to be the icing on the cake. Reforms are needed under the bonnet for the UK market to regain its historic reputation as the investment destination of choice for new companies listing. A coordinated approach is overdue to restore the competitiveness of a market which was previously neck and neck with New York.”
The LSEG responds that the global market for new floats has been subdued.
Schwimmer has said: “There is no de-emphasis of the London Stock Exchange as part of our business. We think it's important that the market, our customers and regulators understand our broader business. The London Stock Exchange is a significant focus for us.”
He added: “Our leadership team spent an enormous amount of time on it. We are actively focused and engaged with government and regulators on it.”
Russ Mould at AJ Bell said: “London has so many things going for it as a financial centre – the language of business; an ideal time zone to straddle trading in Asia, Europe and America; an ecosystem of brokers, fund managers advisers, lawyers that brings tremendous expertise; and it is, in the end, the capital city of the world’s sixth-biggest economy.
“It is therefore a good home for any firm that wishes to list, especially one that is looking to build a loyal, long-term shareholder base, rather than provide a quick-kill by chasing the highest valuation it can get on another exchange.
“The decision by Air Astana to list in London is therefore understandable but perhaps the LSEG could do to be championing British firms and enabling them to raise the capital that means they can hire, invest and grow, showcasing British excellence to the world as it does so. The UK excels in so many areas, including technology, and a few successful listings would be a timely reminder of that.”
Haynes adds: “There’s a need for competition to drive innovation in markets and make them fit for purpose. The current market setup has been in place for a number of decades and clearly hasn’t had the same level of disruption or embraced technological advances as much as others. If the UK wants the deep pools of capital and level of retail engagement we see in the US, we need to recreate the competitive landscape that it has between NYSE and Nasdaq.”
