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LSE takes aim at rivals as it gears up to move into derivatives

Xavier Rolet, chief executive of the London Stock Exchange, is squaring up for a potential legal battle with rival derivative exchanges as he prepares the company to take on their businesses.

Faced with competition in the core business of share trading, and a falling market share the exchange wants to move into options and other derivatives because they provide more stable earnings and represent a gap in its business portfolio.

But Mr Rolet hinted that he believed there could be a case against rivals for restricting competition. "I'm not a legal expert, so I won't comment on that, but if you have a product and refuse to sell it, there would seem to be a case. That's not the way business should be done in Europe," he said.

He declined to comment on the products that the LSE plans to offer, but they are likely to include equity options and derivatives linked to various indices. It is over these that he has a potential issue with rival exchanges.

Mr Rolet, who wants to launch his derivative venture in June, was speaking as the LSE beat expectations with a 26 per cent rise in first-half pre-tax profit to £100m, driven by exceptional items and cost cuts. The company also hiked its interim dividend by 5 per cent to 8.8p.

Reining in costs yielded £18 m of savings and the company also benefited from a £5.6m tax recovery, although revenues were down 1 per cent at £298m.

He also announced that "Turquoise", the company's share-crossing network, was regaining market share after a recent outage, having leapt from sixth to first place. Crossing networks allow institutions to trade large packets of shares anonymously, which protects them against the market moving against them.

Mr Rolet, who has been seeking to transform the exchange to take on tough competition, would not comment on acquisition strategy, but said he wanted to avoid "unwelcome attention" or bids from rivals and was open to deals. "Some consolidation in our industry is inevitable," he said. "We are one of the world's premier exchanges and we want to expand our business," he said.