Issue of the week: Rolet says au revoir
The London Stock Exchange is losing a doughty champion just when the City needs him most
Few big-league bosses have transformed the fortunes of an organisation quite so effectively as Xavier Rolet, said Jim Armitage in the London Evening Standard. When the French banker took over at the London Stock Exchange nine years ago, he inherited an institution “in crisis”. Having failed to become “a consolidator of globalising markets”, the LSE seemed bound to fall into foreign hands. Yet after a series of timely deals – notably the purchase of a majority stake in Lch.clearnet in 2012 – Rolet, who has announced his intention to quit next year, succeeded in creating a £14bn international powerhouse. Indeed, his main achievement has been “to render LSE’S name inaccurate”, by moving way beyond London-centric share-trading into profitable clearing and indices businesses, said Lex in the FT. From the point of view of shareholders, he has played a blinder. The LSE’S share price has risen from 500p in 2009 to £39, marking a 700% return.
Had his ill-fated attempt to merge with LSE’S German counterpart, Deutsche Börse, succeeded, Rolet would have quit the 319-yearold institution last summer, said Nils Pratley in The Guardian. As it is, we can expect “a long goodbye” while a successor is found. Just as well. Rolet still has time to continue “as the City’s most effective speaker” on two critical Brexit themes. “First, that a transitional deal is desperately needed – and soon.” Second, that the EU would be foolish “to dismantle London’s dominance in clearing eurodenominated trades”: the disruption “would create unnecessary risks for everybody”. The latter argument, in particular, “sounds so much better coming from a Frenchman”. London’s dominance of derivatives-clearing globally has certainly made the global financial system safer, said Philip Stafford in the FT. In times of market stress, “a stable clearing house” helps contain the “threat of contagion” of the type we saw when Lehman Brothers collapsed in 2008. With Brexit looming, the battle to grab this lucrative business is heating up. Indeed, the big risk “from a brutal Brexit divorce” is that “clearing will fragment between London, Europe and New York”.
Of more immediate concern for most in the City is the vital need for a transitional deal. The City of London Corporation warns of dire consequences unless one is in place by the year’s end. Lloyd Blankfein, the Goldman Sachs boss, has taken a more direct approach, noted Sean Farrell in The Observer. As Theresa May headed for Brussels in a fruitless effort to unblock the Brexit impasse, he tweeted: “Just left Frankfurt. Great meetings. Really enjoyed it. Good, because I’ll be spending a lot more time there.” Is he bluffing? Who knows. But by the time “we learn whether his warning has serious consequences”, it will probably be too late.