London Stock Exchange has been in the news, with a major Indian company, Essar Energy, deciding to list there. The Exchange is emerging as a leading global player and plans to expand services and products across new regions. Xavier Rolet, having completed his first year as Group CEO, is on his first visit to India. He talks to Rajesh Bhayani on future plans and opportunities in India. Edited excerpts:
Europe has been through some turmoil recently. How does this affect the business of the exchange?
A number of European countries have certainly seen rising levels of debt, but the worry is huge amounts of off-balance (sheet) debt that is difficult to estimate. Given this scenario, investors have turned bearish.
This has resulted in sharp falls in currencies, while inflation is also rearing its head. A falling currency is good for promoting exports, but also raises imported inflation, and that is worrying investors.
However, despite this, there will be opportunities for Indian companies. European countries have deep pools of institutional capital Indian companies are looking to tap into. In the last year, around $125 billion worth of capital has been raised through the London Stock Exchange, underlining London investors' interest in funding growth.
How does LSE plan to grow?
Organically, as well as inorganically, and beyond equities. We will grow in derivatives and fixed income, too. Very recently, we acquired Millennium IT, the Sri Lankan software company, which will enhance our trading software and customer applications, and add a number of other technological capabilities. We have also taken a majority stake in Turquoise, a pan-European MTF providing both lit and dark equity trading across Europe and beyond, with the recent launch of trading in US securities an exciting development. Turquoise has been majority-owned by the Group since February 2010, in partnership with 12 major investment banks.
Will Indian companies’ GDRs (global depository receipts) be traded on this platform?
There is no such plan. But, companies that have raised domestic receipts can be traded on the platform.
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LSE doesn't have round the clock trading facilities like Chicago and some other exchanges, does it?
We are moving in that direction and we want to have partnerships with other exchanges to facilitate that. One of them could be from the Asian region and another from North America. This will take some time to happen and does not necessarily mean equity ownership in other exchanges. To make this happen, you could have a joint venture or a technology arrangement.
Are you talking to Indian exchanges as a partner in this new arrangement?
India is a country in a hurry, with huge growth potential. India will be one of our prime choices for partnership. I can't give any more detail on our discussions with Indian exchanges, but we are not interested in buying equity stakes in Indian exchanges of 5-10 or 15 per cent — this isn't attractive to us.
However, we respect the Indian government's desire to open up gradually, as exchanges are national icons and every country and regulator has its own priorities.
We are open to technical arrangements, providing access and other types of partnership with Indian exchanges, provided there is common interest from both sides.
Are there any specific areas of interest for you in partnering with Indian exchanges?
Our segment for small and medium firms, called the Alternative Investment Market (AIM), is firmly established as the world's leading growth market. We would like to share this expertise with Indian exchanges, if they are interested.
You must also be talking to Indian companies about getting listed in London. How has the response been and which sectors have shown particular interest?
We've had a positive response from Indian infrastructure, energy and utility companies, to name but a few. Raising money depends on market conditions, but we are confident that more Indian companies will raise money in London through the Exchange in the coming months and years.