New LSE CEO Indicates Deal Appetite

Shanny Basar

The appointment of an investment banker as the new chief executive of London Stock Exchange Group suggests that the board in interested is a deal, but suitable targets will be hard to find, according to Octavio Marenzi, chief executive of capital markets management consultancy Opimas.

David Schwimmer, LSE

The exchange said this morning that David Schwimmer will become chief executive when he joins the group in August. Schwimmer spent the last twenty years at Goldman Sachs, most recently as global head of market structure and global head of metals and mining in investment banking.

Marenzi said in email to Markets Media that the appointment of an investment banker suggests that the board of directors is interested in closing some sort of deal, probably in the form of a merger with a larger exchange, or by merging with another similarly sized exchange.

“However, after years of trying to pull this off, it is difficult to see what direction this will take,” Marenzi added. “The large US exchanges would certainly be the obvious candidates, but after Deutsche Börse was rebuffed by regulators, such an acquisition would have difficulty obtaining regulatory approval.”

In its statement the exchange highlighted Schwimmer’s “strategic perspective on the drivers of growth and innovation in financial markets infrastructure” and his experience advising clients on mergers and acquisitions. Therefore, it is possible that the exchange could look to acquire an infrastructure provider, especially as regulators are encouraging a shift to electronic trading and central clearing across asset classes, and data will become increasingly important.

Another market participant told Markets Media that it is interesting that an investment banker was chosen, which indicates the importance of M&A to the exchange, both as an acquirer and a potential target.

Patrick Young, chief executive of Exchange Invest, said in his daily email newsletter: “Too late to bid for NEX alas but presumably he has a few months to reread appropriate materials and prepare for the job at hand of restructuring LSE and moving it forward as a more cohesive department store.”

Last month CME Group, the US derivatives exchange, announced an acquisition of NEX Group, the UK technology provider. CME said in a statement: “Combining NEX’s leading electronic FX and fixed income cash execution platforms with CME Group will improve trading technology and streamline access by reducing the number of touchpoints that clients need to trade across products.  In addition, NEX’s premier OTC post-trade products and services complement CME Group’s derivatives clearing services.  Combining these solutions will strengthen the NEX compression, reconciliation and processing businesses.  The combination will also facilitate the development of innovative post-trade services and data offerings to further enhance cost-effective trading and risk management.”

Oscar Willams-Grut, senior reporter at Business Insider UK, said:

Rob Young, BBC business reporter, said:

There were also the inevitable jokes about actor David Schwimmer in Friends:

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