View from City Road: Lawrence faces uphill struggle at exchange

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The Independent Online
Good luck to Michael Lawrence, because he will need it. The Stock Exchange is not yet the bankrupt organisation without a future that its harshest critics claim, but it will be an uphill struggle to turn it into the dynamic, competitive outfit his brief demands.

His first job should be to block the revived interest among some senior board members in running the Crest settlement system, the replacement for the defunct Taurus.

The exchange messed it up. The Bank of England is supervising efforts to sort it out again. Settlement is a highly specialised technical function that does not have to be run in-house by an exchange. Let someone else do it, so the exchange can concentrate on its real task, to retain its pole position in London over the next decade and fight off the challenges from Paris and Frankfurt.

The exchange has long given up the idea that it has a right to run a single central marketplace on its own terms: abandonment of those ideas was what Big Bang and the end of fixed commissions in 1986 was all about. Technological change means there is now no reason why strong competing exchanges should not emerge in London, as they did long ago in New York and - in the futures markets - Chicago.

The exchange has special responsibilities under the Financial Services Act, which will have to be shared more widely if the likes of Reuters and Instinet make progress. But to survive, the London Stock Exchange still has to compete on costs and service just like any other financial institution, and that means having the cheapest and most efficient trading systems. Indeed, competition will be a spur to that.

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