LSE hits back at Nasdaq with 12% rise in profits

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The London Stock Exchange hit back at the Nasdaq yesterday, unveiling a sharp rise in profits and trading volumes just a day after the battle for its future turned nasty.

On Monday the Nasdaq attacked the LSE board, accusing directors of "milking customers" and behaving with "complacency" in the face of competitive threats.

In response, the LSE chief executive, Clara Furse, unveiled a 12 per cent rise in third-quarter pre-tax profits and released figures showing record trading volumes. She said the exchange's "excellent performance" supported the outright rejection of the Nasdaq bid. Third-quarter pre-tax profits came in at £44.2m, against £39.5m in the same period the previous year, on revenues that were up 11 per cent to of £89.9m.

For the first nine months profits were £120.9m, up 43 per cent, although there was a one-off charge taken in the previous year, and revenues grew 17 per cent to £253.2m.

Volumes through the SETS electronic trading systems surged by 67 per cent over December 2005 to 346,286. For the year as a whole, the total number of trades on the LSE order book was up 52 per cent to 78.2 million, while the value traded surged by 44 per cent to £1.5 trillion.

The LSE has not previously issued quarterly results, reporting figures every six months. But yesterday's statement was aimed squarely at refuting the Nasdaq's claim that its offer represented "fair and full" value for the LSE.

Mrs Furse again said the Nasdaq's "final offer" - £12.43 a share - "significantly undervalues the business and the exchange's unique strategic position".

She said the exchange was "confident of an excellent outcome for the current financial year and continuing strong business fundamentals should ensure a strong performance for the next financial year".

The first deadline for accepting the Nasdaq's offer falls tomorrow, although the US exchange has the opportunity to extend that.

Yesterday the US corporate raider Samuel Heyman again increased his holding in the LSE, buying 162,000 shares at £12.83 through contracts for difference. That takes his stake above 10 per cent, making it possible for him to call an extraordinary general meeting. LSE shares closed the day down 2p at £12.80.

Nasdaq said it "noted" the trading statement but said it "firmly" believed its offer was a "full and fair price".