17 March 2016


by Simon Brickles, former Head of AIM at the LSE and CEO of PLUS Markets (now ISDX), who was recently appointed chair of the newly-established Capital Access Advisory Group

Well done Xavier Rolet!

The deal that London Stock Exchange Group Plc's CEO has negotiated with Deutsche Boerse AG is remarkable. It offers significant benefits. It may also be Europe's last chance to create a credible rival to the huge market operators in the United States.

Whether this offer is bettered remains to be seen and it will be for shareholders to decide whether to accept it. Nevertheless ,Rolet's achievement in getting to this deal demonstrates what an outstanding CEO he has been. It should be recalled that he was not dealt the best hand when he took over as CEO. Previous management had failed to achieve the acquisition of LIFFE. They were not deal-doers. In failing to achieve meaningful deals, the London Stock Exchange became vulnerable. Bids came. The share price of the London Stock Exchange Group Plc rocketed, partly on the back of the benign trading conditions, but mainly on the back of rejected bid after rejected bid. It was thought that management must surely have had some brilliant masterplan to be rejecting such generous bids. Only when the take-over speculation died down was it revealed that the Emperor had far fewer clothes than had been imagined.

At this point, enter Rolet stage right. The London Stock Exchange had no derivative market (where margins are far higher) or proprietorial clearing house. The German Exchange was massively larger. It seemed all the good dates for market operators had happened and the London Stock Exchange Group's share price was down, with the world in economic crisis. Xavier though can and did do deals – with LCH.Clearnet, FTSE, the Russell Group and the Italian Exchange. Each one, well-judged. He launched new products too. In short, he has grown a business substantively rather than just on takeover premiums. Indeed, he has far surpassed anything that could have been reasonably expected, or any previous height for the LSE share price.

Rolet might not quite have achieved a merger of equals in the agreed deal – but given the hand he was dealt, it is remarkable that he has got so very close.

Of course, those involved in the SME world will (and should) have concerns. The Deutsche Bourse AG has closed several SME markets in a fairly cavalier way. Many within the German exchange will have little interest for markets such as AIM that are based on market-making; and resting, as many of them see it, on tax incentives for the primary markets rather than liquidity in the secondary market. The London Stock Exchange has sought to re-assure in this week's announcement and we all must hope that it is followed through in reality – especially once Xavier Rolet leaves.

All of that, though, is small scale and parochial compared to the bigger picture, which symbolises what can happen when an exchange has dynamic leadership.

Bien joué, M. Rolet.