06.06.2019
By Shanny Basar

London Stock Exchange To Expand Footprint

David Schwimmer, chief executive of London Stock Exchange Group, said there is a huge opportunity for the UK bourse to do more in Asia and the Americas.

Schwimmer was interviewed at the FIA’s International Derivatives Expo in London yesterday.

“There is a huge opportunity for the UK bourse to to do more in Asia and the Americas and substantially grow beyond our primarily European footprint,” said Schwimmer.

He added that the long awaited London-Shanghai stock connect will soon come to fruition. The scheme allows UK shares to trade on the Shanghai Stock Exchange as Chinese depository receipts while Chinese A-shares will be able to trade and raise capital in London through global depository receipts. This week Chinese broker Huatai Securities announced plans to raise more than $500m (€444m) on the LSE.

In addition FTSE Russell, the exchange group’s index business, has promoted China A shares to emerging markets status so they are included in FTSE’s global equity benchmarks this month. China has also been added to FTSE’s watch list for possible inclusion in its global bond indexes.

Green finance

Schwimmer continued that another big focus is green finance.

“We have listed green bonds, helped define environmental, social and governance standards for issuers and FTSE Russell has been providing ESG data,” he added. “We are very actively engaged and the City of London is taking a leadership role.”

This week the exchange said it has acquired Beyond Ratings, which provides ESG data for fixed income.

In February this year the exchange also led a $20m funding round in Nivaura, a fintech that automates the issuance and administration processes for financial instruments.

Schwimmer said: “M&A is a tool in our toolkit but it will be difficult to execute a large cross-border acquisition today. We have plenty of opportunities for organic growth.”

Derivatives

He highlighted CurveGlobal, the London Stock Exchange Group’s interest rate derivatives venture.

Schwimmer continued: “This is our attempt to break the monopoly in interest rate futures which has been tried many times before and failed. However, we have strong demand for clients who are looking for an alternative market structure and pricing.”

The chief executive said there was a substantial pick up in CurveGlobal volumes at the end of last year and this year.

“CurveGlobal has a 10% market share in some products and 40% in Sonia futures,” he added. “Technology such as smart order routers are being used in the futures market and we are hugely excited.”

Andy Ross, chief executive of CurveGlobal said in the venture’s May newsletter that there has been an “explosion” in growth in the block market as a result its adaptive pricing mechanism, a different way of trading futures.

“I like to think of adaptive pricing as a voice-based, admittedly, RFQ-like mechanism for futures,” he wrote. “Trade between the bid and offer at a price you like, in the size you want. This is not to say a central limit order book isn’t important – it is vital. But providing the choice of how you trade in different circumstances – utilising an RFQ-like mechanism and an order book – does work.”

He continued that nearly every futures market in the world has been a closed shop while CurveGlobal believes that futures markets globally benefit from competition.

“We think the example in Europe playing out in real-time is proving this,” Ross said. “We see the benefits far outweighing any fragmentation of liquidity, and it seems that a growing number of buy-side and sell-side firms share our view.”

This week CurveGlobal said it is expanding its suite of Sonia interest rate futures on 29 July, which is designed to complement existing three month sonar futures.

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