It is honest to say that 2017 was a tumultuous 12 months for the London Inventory Trade.
In March, simply hours Britain formally triggered Article 50 of the Lisbon Treaty to start divorce proceedings with the EU, the LSE’s deliberate £24bn merger with Deutsche Borse was scuppered by the European Fee – killing the pair’s dream of making a European champion in exchanges to tackle US and Asian rivals.
The LSE was then convulsed by a dramatic falling-out between its chairman, the Metropolis veteran Donald Brydon, and its highly-regarded chief govt, the Frenchman Xavier Rolet. It resulted in a feisty marketing campaign by the activist investor, Sir Chris Hohn, to ditch the previous and retain the latter.
All of it got here to a head when, on the finish of November, the Financial institution of England Governor, Mark Carney, advised Mr Rolet it was time to maneuver on. Mr Rolet’s eight-and-a-half 12 months reign, throughout which the LSE’s share worth greater than quadrupled in worth, was over.
Immediately’s outcomes from the LSE, although, present what a effective enterprise Mr Rolet bequeathed to his successor. A enterprise that, regardless of all the turmoil occurring within the alternate’s boardroom, is in sturdy well being.
Complete gross sales rose by 18%, to £1.95bn, whereas working earnings on an underlying foundation rose by the identical quantity to £812m.
The dividend has been hoisted by 19% to 51.6p-a-share.
What is especially hanging about these outcomes is that they got here even though – as disappointing outcomes from the buying and selling arms of all the large Wall Road banks attest – final 12 months was a really uninteresting buying and selling surroundings.
Nevertheless, opposite to what most individuals assume goes on on the LSE, the corporate as of late makes cash from many extra actions than its conventional capital markets companies – offering buying and selling platforms for equities and bonds.
That accounted for only a fifth of the LSE’s gross sales in 2017. Of higher significance as of late is offering clearing providers, also known as the ‘plumbing’ of the market, the enterprise of guaranteeing that, when a safety is bought, the customer receives the safety and the vendor receives their cash. That made up 36% of gross sales final 12 months.
The largest single section of enterprise, in the meantime, is what the LSE calls ‘data providers’ – offering pricing information in actual time and working indices and benchmarks. This not solely contains its greatest recognized model, the FTSE (the then proprietor of the Monetary Occasions bought its stake in FTSE Worldwide to the LSE in 2011), but in addition indices below the Russell model, a enterprise purchased throughout Mr Rolet’s time on the helm.
That accounted for 38% of gross sales in 2017. Lastly, the LSE additionally offers expertise to market contributors, primarily within the type of buying and selling software program and server internet hosting.
All of those actions grew their gross sales final 12 months, however the quickest space of development was at FTSE Russell, the data providers a part of the enterprise. Different hanging components within the outcomes included a 31% rise within the quantity of swaps (a extensively used monetary by-product product) cleared on the London Clearing Home to $874trn.
Greater than 1 / 4 of those trades had been denominated in euros – regardless of threats from Brussels that such enterprise ought to be relocated to the Eurozone following Brexit. Market contributors are voting with their toes in favour of London.
If there was a disappointment, it’s as a result of there was no information as we speak on Mr Rolet’s successor, the corporate proscribing its feedback to an remark that it was making “good progress” sifting by some “top quality candidates”.
Whoever finally will get that job – and a few of the funding banking world’s largest names have been linked with it – will, whereas inheriting enterprise, nonetheless have some main points with which to grapple.
The primary is seeing off any risk created by Brexit to the LSE’s enterprise. There are international locations within the EU which nonetheless covet the LSE’s place in clearing and a few in Brussels nonetheless blame the LSE for contributing to the Eurozone sovereign debt disaster of 2011-12.
The second is what to do about partnerships. In addition to Deutsche Borse, with which the LSE has sought to crew up on three separate events, Mr Rolet additionally tried to amass the Toronto Inventory Trade.
That deal was killed by Canadian protectionism.
Nevertheless, on the planet of worldwide exchanges, massive is gorgeous. The brand new LSE chief will nonetheless discover themselves below stress to merge with or purchase international rivals.