New LSE chief cuts staff as he prepares to take on rivals

Rolet promises customers further price cuts in bid to win back market share

The London Stock Exchange is set to embark on a spree of deals in a bid to transform the company. Cazenove is on the hunt for targets as the LSE's chief executive, Xavier Rolet, ponders further price cuts to respond to the competitive threat posed by rivals such as Chi-X and Turquoise.

The exchange operator announced yesterday that a total of 133 jobs have been cut, a move that should save it £11m a year after a one-off £14m hit has been taken to cover redundancy costs.

The losses equate to 12 per cent of the company's workforce, with around half going from its London headquarters and the rest from its Borsa Italiana sister exchange in Milan. The average salary of those affected is £80,000, although that figure is distorted slightly by the inclusion of big-hitters such as the head of the LSE's Aim market, Martin Graham.

Mr Rolet, a former Lehman Brothers banker, has already cut prices and made it easier for users to hit the top level of discount for frequent traders since taking over from Clara Furse.

He has also reduced the notice period for tariff changes to two weeks, from two months, to enable the company to respond swiftly to any fresh moves made by its rivals.

Further price cuts could follow anyway as the exchange seeks to hold its share of trading in FTSE 100 stocks at 63 per cent – down from 78 per cent in September last year – and claw back some of what it has lost.

Mr Rolet last week announced the acquisition of the technology company MillenniumIT and is looking at further deals to strengthen the exchange's position in the global battle with Nasdaq, the New York Stock Exchange and Deutsche Börse. This could include further moves on the technology front as well as possible mergers with other exchange operators.

The LSE will move into UK equity options trading by adapting its Italian derivative trading business, Idem, to the British market, putting it in direct competition with the London Futures Exchange (Liffe), which is owned by the NYSE.

Mr Rolet is also considering bringing the LSE's clearing business to London with the aim of cutting the price of the vital trading back office, which he sees as one of the main brakes on passing further tariff cuts on to the exchange's customers.

Yesterday, Mr Rolet said: "Although market conditions remain challenging, the group continues to see good levels of activity in many parts of the business. We continue to take actions to ensure the group is well placed to compete and develop."

Some £43bn was raised on the exchange's markets in the five months to 31 August, which is broadly in line with last year, but the average daily value traded on its SETS electronic order book declined 43 per cent year on year at £4.6bn.

Demand for terminals taking real time data reduced to 94,000 professional users from 98,000 at the end of June 2009, while professional terminals receiving Borsa Italiana data declined by 3,000 to 142,000 in the same period, a reflection of the difficulties faced by the City.