Is The Game Up For The London Stock Exchange?
American stock exchanges are poised to take control of both London and Europe. Should we care?
London Stock Exchange chief, Clara Furse, has wriggled out of tight corners before, but the recent hostile bid from the US challenger Nasdaq will test her powers to the limit.
London's line is that there's no point talking because the £2.7bn offer undervalues the Exchange. But that argument looks finely poised. LSE shares are currently trading at about $13 per share, not so far off the $12.43 final offer that Nasdaq, which already owns a near 30% stake, is tendering.
The danger from Furse's perspective is that she gets painted as a prima donna who just doesn't want to sell. But the game looks up. To avoid being penned in by Nasdaq, Furse needs either to make an exceptional value argument or to find a brave investor prepared to wade in and take a big stake.
Having already seen off Deutche Borse, Macquarie and other suitors, the curtain has now risen on the final act of the LSE's romantic drama. Shareholders are likely to accept an offer at the right price, but that doesn't mean there won't be regrets.
What users want is a pan-European exchange, with independent pan-European clearing and settlement. With the NYSE now poised to buy Euronext, and Nasdaq the LSE, that goal looks increasingly unattainable.
Then there's the regulation problem. The so-called "Balls clause" – a law proposed by Economic Secretary Ed Balls to ring-fence the City against onerous American-style regulation – is supposed to be protective. But we haven't yet seen its text, and the US has an unappealing habit of passing legislation with extra-territorial reach.
The London Stock Exchange might not feel it needs friends like Ken Livingstone, yet the London mayor has raised some key issues of public concern. One is that although the Americans can apparently acquire us, Congress would never allow the reverse to occur. Another is that London has boomed, while the international competitiveness of US capital markets has been all but destroyed by regulation.
Treasury Secretary Hank Paulson is on a mission to turn back the tide, but the Americans might well conclude that if they can impose some of their methods on us it may be an equally effective way of levelling the playing field.
We already know that Nasdaq chief, Robert Greifeld's support for Aim is less than wholehearted. This takeover might well succeed, but it's highly doubtful whether it will be good for London, or securities trading in general.
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