Former Lehman Brothers France CEO Xavier Rolet, who will take the helm of the London Stock Exchange from long-serving chief Clara Furse on 20 May, could be the shot in the arm the exchange needs to cope with its current challenges, according to market observers.
Rolet has a strong background in trade execution. Before his eight-year stint at Lehman Brothers (Europe), he held senior equity trading positions at Dresdner Kleinwort Benson, Credit Suisse First Boston and Goldman Sachs. Some feel this experience could help the exchange weather the storm.
“Volumes are down everywhere and all trading venues are competing for a smaller pot,” said Bob McDowall research director for Europe at research and advisory firm TowerGroup. “In this environment, it is all about the basic issues of quality and speed of execution. The appointment shows that the exchange is a little rattled by the inroads that some of the alternative trading venues are making into blue-chip stocks.”
In recent months, the LSE, like other major European exchanges, has been rocked by competition from multilateral trading facilities (MTFs) and dwindling trading volumes and values. The average daily value of trades on the LSE fell 60% £6.2 billion in January 2009 from the record volumes seen in January 2008.
McDowall also expects Rolet to focus on resilience of the LSE’s systems. “The LSE clearly can’t have another outage as they did on 8 September last year. In that sense he is the right man for the times,” he said.
Rolet’s investment banking experience could also help the LSE to identify the acquisitions it may need to stay ahead of the game. “Given Rolet’s background, I think he is going to be very good for the LSE because it is going to have to do a deal sooner or later to plug the gaps in its armoury,” said Herbie Skeete, managing director of Mondo Visione, a publishing company specialising in exchange information. “One of the big weaknesses of the LSE is that it has not got a very strong base in futures and options. That gap has to be plugged and that means having a deal-maker.”
Skeete also expects Rolet’s experience as an LSE customer will stand him in good stead. “Xavier comes from the market, which is always a plus, and he understands the market from being close to the sharp end,” he said.
Despite his broking background, Rolet may not seek to appease customers at the expense of the LSE’s best interests. “He will certainly appreciate the view of the customer, given his recent experience on that side, but obviously he wouldn’t make changes simply because he is familiar with what customers want,” said Andrew Mitchell, exchanges analyst at investment bank Fox-Pitt, Kelton. “He would do what is right for the LSE and its shareholders.”
Mitchell added that as well as the challenges, the LSE has a number of opportunities. “These include developing the Baikal dark pool, exploiting reduced latency once activity revives and assessing consolidation moves,” he said.