London Stock Exchange

ANGLICANPAT

Apologies if this has been covered , a quick search didnt reveal much

If a 'merger' goes ahead between Deutsche Börse and our own London Stock Exchange ,( with DB apparently being favoured with 10% more than the LSE when I last read about it) , will it mean that Germany could if it wished to in time,surreptitiosly move the whole caboodle to Frankfurt ?
(And then theres America waiting in the wings with its own bid if DB fails!)

Being a financial services power hub is pretty much London/the country's main asset I thought, so doesnt the risk of 'losing it' put us in a weaker position?

I dont understand. Cant our Govt stick an oar in to stop it on the grounds that its not in the country's interests or something?

Would probably bring house prices down dramatically though wouldnt it , following a London exit! Suppose thats one way of doing it.

Im not well up on political and financial affairs, so Im interested to hear some views on this merger and its effects. To me, it feels like it's yet another example of the Govt turnning a blind eye , and shooting the country in the foot? If so , why?
In this case too many members of the Govt holding shares in the LSE perhaps?

Is it something to do with adding a little bit more fright about what could happen if we upset Germany by leaving the EU?

Maybe the merger is a good thing ? Id be interested to hear some views on the ups and downs of it. Thanks.

Generali

A Stock Exchange is a market, a place that links buyers and sellers under a set of rules in return for a fee. In that regard the LSE or DB are no different from your local market where you can buy a pound of carrots or a pat of butter.

Markets work best where there is what financial types like me call 'liquidity'. Liquidity is just a word for lots of buyers selling lots of stuff and lots of sellers selling lots of stuff being able to buy and sell without changing the price too much. Liquidity means that if I want to buy a cwt of carrots or even a ton I can do so without pushing the price of carrots up much.

If DB or the NYSE or another market group buys the LSE then they're going to want to keep a market where there is liquidity and there is a ton of liquidity in London.

I don't think there is anything to worry about.

princeofpounds

The LSE is not really a national institution, although many people seem to think it is. Perhaps it's the natty crest on its branding which makes people think that.


I don't know the full history but it was owned by its members and then its shareholders for a long time. Not government.


Certainly for years and years already anyone could be a shareholder. Even those dastardly Germans. I don't know the numbers but it might not have been majority-owned by Brits for decades already.


So why shouldn't the owners of that company be allowed to buy or sell shares as they see fit?


Furthermore, what is there to 'move'? A stock exchange is largely an IT platform wrapped up with a lot of legal and financial law and regulation.


That legal structure all remains in the UK, and people value it and like it precisely because it's a UK structure. That is largely the valuable part - the IT platform could be copied in a few months and sited anywhere in the world, already.


For example, the LSE is already merged with the Italian Borsa. Both still seems to exist and function perfectly well, even though they are the same company. We don't see all Italian companies listing in London as a result.


Furthermore, the entire financial system does not revolve around one exchange. Equities traded on the LSE are actually a minority part of the financial system. There are vastly bigger and more important markets for London, in foreign exchange, fixed income, derivatives and so on. Things that most people never even think about in their lives.


People just seem to misperceive what the LSE actually is.


NB: I also agree with Generali on the liquidity point, but I chose to omit it as it's not always easy to explain to people. It's very tied up with the legal framework point I mentioned. Basically everyone is used to dealing in the UK under UK rules, and everyone likes it. So if you want to have an exchange, best to have it in the place everyone likes to trade.

westernpromise

As a company can choose to list itself on whatever exchange it feels like, and the trading is now all electronic, there is no particular reason for the exchange to be anywhere.

The governing regulation would be different in the US versus Europe versus Singapore, which are different regulatory jurisdictions, but there would be no difference between London and Frankfurt except that Germany's regulator, BaFin, would replace the FCA as the exchange's supervising regulator.

The LSE is where it is for historical reasons, and has stayed there because the staff required to run it are easily found in London, and because a lot of the companies listed on the LSE (and with whom it needs to preserve relations) have either a headquarters or some other office in London. This is not true of many other European cities, so there is no obviously superior location than London.

If necessary, though, it is relatively straighforward for an exchange group to decree that its contracts are now listed on another of its exchanges. InterContinental Exchange did this in 2012 when they declared that their energy contracts were now European-based contracts rather than US-based. Overnight this took all those contracts out of the reach of Dodd Frank, but the clients didn't notice a thing. They just logged in as before but were now on a UK exchange with UK rules.

Generali

princeofpounds wrote: »

That legal structure all remains in the UK, and people value it and like it precisely because it's a UK structure. That is largely the valuable part.....

The legal structure is increasingly enjoyed by foreign asset owners wishing to sell or companies and Governments wishing to borrow. Bond markets, for example, are increasingly moving to the UK because of the relatively 'fair' legal system and relatively 'cheap' costs in resolving disputes.

mwpt

Many countries have a ratified stock exchange which controls which stocks (companies) are listed on the exchange for trading. But because it is regulated doesn't mean it is a tax payer owned company. LSE is privately owned. You can buy shares in the LSE, on the LSE.

https://uk.finance.yahoo.com/q?s=LSE.L

Others have gone into more depth but I wanted to point out that even though the LSE has the authority to control which companies are listed on the primary exchange (called LON), there are competitor electronic market places where you can buy and sell the same shares (called MTFs). These will have their software running in a datacenter in London because they all compete for liquidity (mentioned by Generali) on price and latency, a component of which is the proximity of the datacenter to the big investment players, most of these located in London.

In recent years, the big investment automated trading houses (and smaller leaner ones) have started putting their own servers in the same datacenter as the stock exchange, for faster access to the market to nab the arbitrage opportunities (or worse, front run). So in theory, these datacenters could just be up and moved somewhere else, but in practice this is unlikely to happen. Also, the LSE datacenter could move but the regulated stock exchange is far more than just the datacenter and software and will always retain presence in London.

So no, we're not selling off another bit of our crown jewels.

ANGLICANPAT

Thanks everyone, thats a perfect lesson for me . I understand it far better now, and it seems Im growling up the wrong tree ! Pleasing to know its not the give away I thought it might be , losing high flying financial and supporting jobs etc.

Thrugelmir

ANGLICANPAT wrote: »

I dont understand. Cant our Govt stick an oar in to stop it on the grounds that its not in the country's interests or something?

If you don't want UK companies sold to overseas investors. Start buying shares.

chewmylegoff

westernpromise wrote: »

As a company can choose to list itself on whatever exchange it feels like, and the trading is now all electronic, there is no particular reason for the exchange to be anywhere.

The governing regulation would be different in the US versus Europe versus Singapore, which are different regulatory jurisdictions, but there would be no difference between London and Frankfurt except that Germany's regulator, BaFin, would replace the FCA as the exchange's supervising regulator.

The LSE is where it is for historical reasons, and has stayed there because the staff required to run it are easily found in London, and because a lot of the companies listed on the LSE (and with whom it needs to preserve relations) have either a headquarters or some other office in London. This is not true of many other European cities, so there is no obviously superior location than London.

If necessary, though, it is relatively straighforward for an exchange group to decree that its contracts are now listed on another of its exchanges. InterContinental Exchange did this in 2012 when they declared that their energy contracts were now European-based contracts rather than US-based. Overnight this took all those contracts out of the reach of Dodd Frank, but the clients didn't notice a thing. They just logged in as before but were now on a UK exchange with UK rules.

Re: regulation, would depend how they structured the enlarged group. If the LSE group continued to operate as a wholly owned subsidiary (incorporated here) operation of Deutsche Bourse then it would need to have separate authorisation to operate as a regulated investment exchange from the FCA. An alternative model would be to transfer all operations into a German entity and use the passporting provisions of MIFID to allow it to operate the LSE's markets from a UK branch. I think the former is much more likely, at least in the short and medium term.

Who is to say longer term what financial markets will look like and whether national stock exchanges, MTFs etc backed up by traditional clearing and settlement will continue to exist in the long term. Perhaps everything will be replaced with a block chain system, who knows.

chewmylegoff

Thrugelmir wrote: »

If you don't want UK companies sold to overseas investors. Start buying shares.

I'm not sure that ANGLICANPAT will have the necessary financial resources required to ensure the sovereignty of British companies. He/she will need £2.5billion to build a blocking stake in LSEG alone, it seems unlikely but then again, you never know.

Thrugelmir

chewmylegoff wrote: »

I'm not sure that ANGLICANPAT will have the necessary financial resources required to ensure the sovereignty of British companies. He/she will need £2.5billion to build a blocking stake in LSEG alone, it seems unlikely but then again, you never know.

My observation was really more generic. In that unlike other cultures we place no value on what we have. Being more than happy to cash in and spend the money partying today. Rather than retaining control and generating income for future generations.