Stock Exchange’s Schwimmer right to splash the cash

WHEN Xavier Rolet joined the London Stock Exchange, he quickly set about transforming the sickly old market with a series of canny acquisitions.

Today, his replacement David Schwimmer has arrived with a bang too, shelling out £384 million for a further 15% chunk in LCH. This is the business that dominates the infrastructure clearing the world’s trades in everything from bonds to foreign exchange.

You could argue the deal is risky for LSE shareholders, given that LCH’s work has been eyed greedily by politicians in Berlin. They see Brexit as a juicy chance to snap up London’s euro-denominated trade.

Given that, surely it’s a huge risk for the LSE to be increasing its exposure. Also, why would shareholders be selling if they thought LCH’s future was bright?

Don’t get too carried away by the negative story here, though.

You can never be sure about the direction of European policy on financial services, but lately, it has been moving in LCH’s favour.

Investors around the world, including European ones, have been telling Brussels with increasing urgency that only LCH has the clout to clear euro-denominated trades efficiently and safely. The politicians’ rhetoric has softened as a result.

Rather than fleeing a stricken business, it seems more likely that the selling shareholders today are leaving because they need the cash. After all, two are ailing German banks and another is the stock exchange of troubled Istanbul.

Bears also argue Deutsche Börse is taking market share from LCH, but that, and any residual Brexit worries, are reflected in the price Schwimmer