Unlock Editor’s Digest Lock for Free
FT editor Roula Khalaf will select your favorite stories in this weekly newsletter.
The London Stock Exchange was hit with worse news last week when mining group Glencore said it was considering moving its main list to another exchange in search of a higher rating. . Glencore can participate in the Exodus of companies such as Flutter and Building Materials Group CRH.
Exchanges can get comfort from one thing. This will not lose a list of much larger companies. This is the ninth most valuable on the FTSE 100 with a market capitalization of £620 billion earlier this week. The venture has changed from an acquisition target to the London Stock Exchange Group, the European champion of global industry over the past decade.
The Gulf of property between the London Stock Exchange and its pro-LSEG is impressive. The former set-off trend does not prevent the latter from a steady rise in financial value. The explanation is simple. Stock lists and trading account for only 3% of LSEG’s revenue due to diversification over the past decade.
Conversion of LSEG from Stock Exchange to Global Hub for trading and clearing and data and analysis as defence strategies are erroneous. In 2016, they agreed to an equal merger with Germany’s Bells, which was blocked by the EU. It is much more valuable than the current latter, six times the market value of Euronext, which owns the Amsterdam and Paris exchange.
However, LSEG’s financial success stories leave behind issues of identity. The group is not considering moving to the New York Stock Exchange, but it could be more valuable if it were, thanks to its highly rated global trading and data business. Another venture with a similar financial position and less heavier history is seduced to change its name or sell a business that is behind.
Once things stand, exchange and LSEG are stuck in a strange relationship. LSEGs gain luster from businesses dating back to the 17th century, but exchanges benefit from being owned by groups that are not vulnerable to purchase bids. But it’s easier for both if their financial outlook is more adjusted.
Some content could not be loaded. Please check your internet connection or browser settings.
Investors will hear the LSEG response this week when David Schwimmer, CEO since 2018, presented his 2024 results. His predecessor Xavier Loretto began a transformation, but former Goldman Sachs banker Schwimmer went ahead. He has carried out the sharpest pivot, a $27 billion acquisition of financial data provider Refinitiv in 2019.
LSEG has transformed Refinitiv into a somewhat powerful challenger to Bloomberg under the Workspace brand, backed by an alliance with Microsoft. The transaction also gave a 51% stake in TradeWeb Markets, a rapidly growing US bond and fixed income derivatives platform. It’s less famous than the London Stock Exchange, but it’s earnings higher.
There are broader lessons in exchanges and market platforms. Investors often attach the best value to their most exciting operations. LCH is one of the world’s largest deposits of bonds and derivatives liquidation and is one of LSEG’s most highly regarded assets. The stock list is attracting more attention, but bond trading and clearing are quietly reliable.
LSEG’s antithesis is EuroNext, which relies heavily on stocks. EuroNext’s market value is low, but measures such as new listings and total trading volumes on the seven stock exchanges have beaten London. Chief Executive Stéphane Boujnah last month claimed that losing the list to New York was a “great London issue.”
Boujnah clearly loved LSEG to lose patience with the London Stock Exchange and sell it to him. No matter how small LSEG’s share of revenues is, it’s hard to believe given the importance of exchanges with London as a financial centre. LSEG is in a much better position to buy Euronext itself, but it would raise the issue of competition and the European hackle.
The truth is that LSEG removed itself from the old game of the Stock Exchange Music Chair and worked well to build a wider business under the associated brands. Perhaps you won’t be grateful to have returned from shareholders. Instead there are a lot of data, analysis and trade-related operations.
However, the London Stock Exchange and its parents should not be too separate. While it may not be very important to LSEG’s financial valuation of the original assets being in trouble, exchanges continue to be at the heart of the brand.
john.gapper@ft.com
