Newspaper article The Evening Standard (London, England)

Tell Us, Gordon, Would You Step in to Save the LSE? CITY COMMENT

Newspaper article The Evening Standard (London, England)

Tell Us, Gordon, Would You Step in to Save the LSE? CITY COMMENT

Article excerpt


A COMMON thread in opposition to Nasdaq's bid for the London Stock Exchange is the belief that the American interest is in eliminating a competitor, not in fostering the London market's continuing growth.

The American exchange gets all but an insignificant amount of its income from company flotations and the listing of new shares, and thus has been hit both in the pocket and in the mind by the emergence of London as a serious international centre that many in the world appear to find more attractive than the capital markets of the United States.

The US is not used to competition from overseas in its domestic markets - it has always been far too protectionist for it to be an issue - so one can understand why its sudden emergence comes as a shock.

What better way to restore its monopoly than by buying the competition with borrowed money and then leaving it to languish?

The problem for London is that the Exchange is far more than just a bog-standard listed company.

Taking just the Alternative Investment Market (AIM), the amount of money the LSE makes from it is trivial - the more so because of restrictions put upon it by the Office of Fair Trading. But the amount of money firms in London make out of the activity generated by AIM is vast. Several hundred companies a year come to the market and each needs advisers accountants and lawyers, people to watch over its continuing presence in the market and people to continue to monitor the trading in the shares.

The same principle holds for the main market. The millions the Exchange makes in profits for itself are as nothing to the billions that London's organisations make by being active in or providing services to the market.

The investment banks among them are currently fed up with what they see as the monopoly profits the exchanges have made in the years since they converted from member-owned businesses to public companies, and perhaps they have a point. But they also need to retain a sense of proportion.

So the issue for London is not how much the Stock Exchange makes, nor how big is its market capitalisation. The question participants in the London market should ask is how much money they would make if the Exchange marked time or went into decline following a change of ownership, so it lost its position against other centres.

The issue is not Wimbledonisation - running the world's best tournament though all the leading players are foreign. The issue is selling Wimbledon itself, with no guarantee that its famous grass courts won't be dug up or worse because the Americans perform so much better on clay (it's slower).

People should question, too, even if Nasdaq proved to be a benign owner, how the change would be seen from other parts of the world. …

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