ABBA, the Volvo and Ikea .. now Swedes eye London Stock Exchange

'The venue may be British, but the winners all seem to be from overseas'
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The Independent Online

Who would have thought that the country which gave us ABBA, the Volvo and Ikea would now be bidding for the London Stock Exchange (LSE).

Who would have thought that the country which gave us ABBA, the Volvo and Ikea would now be bidding for the London Stock Exchange (LSE).

This week's hostile bid by OM, a Swedish technology company, has thrown into doubt the planned merger between the LSE and Frankfurt's Deutsche Borse. The vote by the LSE's members on the proposals to create iX, an Anglo-German exchange, scheduled for 14 September, has now been postponed indefinitely.

It now appears there will be an auction for the LSE, with the possibility of other parties throwing their hats in the ring. New technology means the geographical location of an exchange has become irrelevant, and London's suitors could include a French-led consortium, Euronext, the American high-tech exchange, Nasdaq, even the Australian stock exchange.

One of the main reasons why London has to make a deal in the first place is it has mismanaged new technology lamentably. Both the Germans and the Swedes are years ahead. Some pundits suggest we could yet see a bid from a technology company like IBM or Microsoft.

The important thing for private investors is - how will all this affect me? There are no obvious answers. We are probably at the start of quite a long period of uncertainty, but this week's events provide one crumb of comfort. On Thursday, details were unveiled of how the cost of settling share transactions between the UK and Germany will be cut by 90 per cent. CRESTCo and Clearstream, which provide settlement for shares in the UK and Germany, said that under iX cross-border deals would cost no more than local ones.

One of the worst aspects of the Anglo-German proposal has been the lack of detail, and Thursday's announcement went a long way to remedying this. As usual, the question of how much of these savings will be passed on to the private investor remains to be seen. My hunch is at least the argument seems to be going in the right direction. Until this week, the iX deal looked like a cosy stitch-up prompted by big American investment banks that want to be able to deal more cheaply in Europe.

No-one seemed to have worked out how the two regulatory systems would be combined, or whether you would have to pay for shares in euros. With the Swedes entering the fray, the LSE and the Deutsche Borse know they better come up with some convincing answers, and fast. Also, an auction might help to drive costs down.

One of the most frustrating things for the private investor is how little his or her interests are being considered. The future of the LSE is being driven by the big institutions. The Bank of England and the Treasury, who might have represented UK private investors' interests, have made it clear they are steering clear of the fray.

This leaves the UK investor in the same position as a spectator at Wimbledon. The venue may be British, but the winners all seem to be from overseas. This is particularly galling as private investing in the UK is really taking off. We now live in a shareholder culture.

Some argue investors in the UK should relax, as the LSE is just a shadow of its former self. After all, settlement of share deals is run by CRESTCo, a creation of the Bank of England, while regulation of share dealing has been handed to the Financial Services Authority (FSA).

The old Stock Exchange floor in the City, where paper-based trading used to take place, has been used for five-a-side football tournaments, amongst other things. The one real asset the LSE still possesses, its automated share dealing system, simply isn't up to international standards, according to this view, and the sooner we link up to a superior one the better.

Perhaps. For the private investor, meanwhile, the only thing to do is wait and hope that the auction for the LSE really will drive down costs - for everyone.

* John Willcock is Personal Finance Editor of The Independent

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