LEX Strange but true. The FTSE100 index has soared by 53 per cent from its March low, yet first-half net income at the London Stock Exchange sagged by 40 per cent to £49.3m. Lower equity trading volumes were mostly to blame. But the LSE, like other incumbent European exchanges, also faced strong price competition in UK cash equities from newer trading platforms such as BATS Europe, Chi-X and Turquoise. In October, its monthly market share fell to 58 per cent, from 96 per cent in January 2008, according to Thomson Reuters. Xavier Rolet, chief executive, needs to hack away at costs to remain competitive.
The former derivatives trader has made good progress doing just that since he started the job in May. He has cut trading fees, although arguably he had little choice. Some of the LSE’s investment bank clients last year launched Turquoise as a cheaper alternative venue after the LSE refused to cut fees. Nonetheless, post-trade costs for settlement and clearing have kept the all-in cost of trading on the LSE stubbornly high. To address this, the LSE has asked Euroclear, the settlement firm, and clearing house LCH.Clearnet to slash the clearing and netting costs charged to investment banks.
