LSE Chief Rolet to Leave Next Year -- 2nd Update
October 19 2017 - 06:59AM
Dow Jones News
By Ben Dummett
London Stock Exchange Group PLC on Thursday said Chief Executive
Xavier Rolet would leave the company by the end of next year,
bringing down the curtain on a tenure marked by a big bet on index
services and a failed attempt to create a pan-European
exchange.
The LSE said it would start looking for a new chief executive
and work closely with Mr. Rolet--who was appointed in May 2009--to
ensure a smooth handover.
Despite the lengthy transition, the LSE's new CEO will likely
take the helm amid Britain's messy divorce from the rest of Europe
and the uncertain economic and political climate that is creating.
At the same time, the company's lucrative business clearing trades
in derivatives and other securities faces new competition. Earlier
this month, German clearinghouse Eurex, which is owned by Deutsche
Börse AG, announced plans to set up a profit-sharing system with
customers to try to win market share from the LSE's majority-owned
LCH Group Ltd.
Still, Mr. Rolet is leaving the LSE in a position of strength,
as one of the world's biggest providers of licensing indexes for
institutional investors and developers of exchange-traded funds.
This follows the 57-year-old's $2.7 billion acquisition of
index-services provider Frank Russell Co. in 2014. The deal
represented a successful bet on low-cost funds that mimic
benchmarks from higher cost mutual funds.
Vanguard Group, a leading provider of index funds, attracted
nearly $300 billion into its funds for the first nine months of
this year, almost matching flows into the firm for all of 2016 and
underscoring the demand for index products on which these types of
funds are built.
The LSE's latest results highlight the benefits of Mr. Rolet's
aggressive move into index services. The exchange operator Thursday
reported an 18% jump in third-quarter revenue from the same period
a year ago to GBP442.7 million ($584.5 million), led by gains in
its information-services division, which includes indexes, as well
as by a strong performance from its clearing operations. The
company said total income for the third quarter rose 17% to
GBP486.1 million.
Under Mr. Rolet's leadership the market capitalization of the
LSE has risen from about GBP800 million to almost GBP14 billion,
the company said in a statement.
Still, Mr. Rolet's more ambitious plans to create a pan-European
exchange, and before that a trans-Atlantic exchange operator,
ultimately failed amid regulatory and political pressures.
After agreeing to a near $30 billion tie-up with Germany's
Deutsche Börse, European regulators blocked the proposed deal in
March after more than a yearlong effort to complete the
transaction.
The exchanges hoped the combination would create a more
formidable competitor against U.S. rivals such as CME Group Inc.
and Intercontinental Exchange Inc., while bringing greater
financial stability to Europe's capital markets and offering
companies and other market participants a deeper pool of
funding.
But the EU worried the deal risked giving the combined entity
too much influence over the clearing of fixed-income trading after
the LSE refused to comply with certain conditions, including the
sale of the LSE's Italian credit-trading platform.
In 2011, the LSE tried to create a trans-Atlantic exchange
operator through a merger with Canada's main stock market operator
but that succumbed to a rival homegrown bid that had the backing of
some of Canada's biggest executives and politicians.
Maryam Cockar contributed to this article.
Write to Ben Dummett at ben.dummett@wsj.com
(END) Dow Jones Newswires
October 19, 2017 07:44 ET (11:44 GMT)
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