Exchange looks to life after Clara

Dame Clara Furse's departure will open a new chapter in the LSE's 300-year history. It may be the toughest one yet. Nick Clark reports

So farewell then, Dame Clara Hedwig Frances Furse. The first woman chief executive of the London Stock Exchange stepped down yesterday "after eight somewhat eventful and enjoyable years," and a mixed legacy in charge of the group, which traces its history back to 1698.

She left the dais of the exchange's headquarters in Paternoster Square, London, to warm – if not uproarious – applause. Shareholders, employees and rivals alike have described her as "an iron lady," "Queen Boudicca" and a "mastermind."

Brian Winterflood, the chairman of City stockbroker Winterflood Securities, believes her tenure has been a success. He added: "I'd give her an eight out of 10, with an E for effort. Xavier Rolet is an impressive candidate to take over. This is a bright new beginning." Yet others have raised nagging doubts over her policy during the industry's consolidation drive, saying she failed to face up to the challenges adequately.

Dame Clara believes the business is in a solid position for her successor, and said yesterday it "occupies a unique strategic position at the heart of the financial centre". Others fear the empire is in severe decline.

Yesterday's swansong results showed revenues up 23 per cent to £671.4m, and adjusted operating profit up 17 per cent to £338.6m. However, it was marred as the group fell to £225m pre-tax losses following a writedown from the Italian business. Dame Clara was asked yesterday what qualities are needed to be chief executive of the LSE. "Xavier's got them," she replied. Xavier Rolet, who previously ran Lehman Brothers' Paris office, called it an "honour" to take over a company steeped in such history. "Clara has created a very strong business that is well placed for a successful future," he added.

As the economic downturn has hit the financial markets, the LSE has suffered. Primary listings are down, and trading and data costs falling.

It is a tough challenge, Mr Rolet admitted yesterday, as competition increases. "Customers are demanding more efficiency, with services at ever lower prices. We will meet the challenges." The group is already planning its next technology overhaul, after spending £40m on its electronic platform TradeElect.

One of Mr Rolet's biggest challenges is to fight off a series of alterative trading platforms that have sprung up in the wake of the European Union legislation enacted two years ago. It has sent shockwaves through the European markets, contributing to a plunge in the LSE's share of trading in the UK from more than 90 per cent to 54 per cent.

Octavio Marenzi, the founder of research group Celent, said: "They were caught asleep at the wheel with Mifid." Mifid, the European Union's Market in Financial Instruments Directive, instructs brokers to look at all venues for the best price to trade a stock. A series of upstart trading venues, such as Chi-X and Turquoise, have sprung up and have, according to one rival, "started eating the LSE's lunch". He added: "There was only so much they can do, but I'm pretty sure there was no grand plan to deal with the fallout of Mifid."

High on Mr Rolet's agenda will be a plan to halt the decline on AIM, the company's growth market. There hasn't been a single IPO this year, liquidity is down, and companies have delisted citing the economic conditions. It also faces pressure from rivals, such as Plus Markets.

Another of the exchange's plans to boost trading was hit by pure bad luck, and Mr Rolet will hope it does not prove a headache at the start of his reign. The LSE announced the launch of a new platform to much fanfare last year. Unfortunately, its partner in the venture was Lehman Brothers, whose subsequent collapse put the project on hold. It plans to launch next month.

The group has seen huge change under Dame Clara after she took over in February 2001. She oversaw the company's listing and by the end of her reign she had trebled revenues, lifted operating profits fivefold and paid a dividend seven times as high as in 2002.

The real black mark on her record was failing to bring a world-class derivatives operation to the LSE. She was outflanked by European rival Euronext, which bought Liffe, a derivatives platform, from under her nose. While the LSE has attempted to boost its derivative trading, Mr Rolet does not have an easy task in taking on Liffe or the other European incumbent Eurex.

When asked about her legacy, Dame Clara said she had built a strong management team that has "transformed the exchange. We are clearly the international listing venue of choice". One senior source who works for a rival exchange said: "She has reorganised the LSE well and made it more international."

Mr Rolet signalled he will increase the roster of partnerships such as those signed recently with TMX in Canada, and in Oslo and Tokyo. He will also oversee the full integration of Borsa Italiana, the Milan-based exchange, which it bought for £1.1bn two years ago

That Mr Rolet is head of an independent group is extraordinary after Dame Clara fought off five bids for the group. The move has split the market as some believe she should have sold at almost £13 a share to Nasdaq, as they now trade just under £7. Others disagree.

Brian Winterflood said: "She didn't want to sell the family silver, and that was a great credit to her." Dame Clara backed her decision to reject the bid yesterday. She said: "I think the decisions that were made were very well explained and well received by shareholders."

She said she leaves with few regrets. And now? "I'm going to have a really nice long summer," she said. Mr Rolet will not be so lucky.

Modern challenges: The LSE's biggest threats

* The LSE's biggest rivals have traditionally been the exchange giants on the Continent. It has long been engaged in a bitter battle with NYSE Euronext and Deutsche Börse for listings and trading which has become increasingly acrimonious. Both of the European groups have this year announced that they are launching alternative trading platforms that will also look to take volumes away from London's systems. Both also have significant derivatives operations in Liffe and Eurex, which dwarf the platform run by the LSE.

* Of the upstart "multilateral trading facilities" (MTF), the runaway winner in the UK has so far been Chi-X.

The platform has built up a 7.1 per cent share of UK equity market volume, according to Thomson Reuters. Chi-X was launched by agency broker Instinet in 2007.

* Turquoise was launched last year as the serious MTF challenge to the LSE. The venue had heavyweight backing from nine investment banks, but so far the trading volumes have been disappointing. However, it expects to break even this year and is planning a series of initiatives including launching a derivatives platform.

* The LSE's growth market AIM has suffered in the financial crisis, but rival Plus Markets is also proving a headache as it hit a record volume of trading in the first quarter.

Start your day with The Independent, sign up for daily news emails
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Recruitment Genius: Online Customer Service Administrator

£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

Recruitment Genius: Digital Marketing Executive

£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before