If you were fooled by Cool Britannia, don't be: there may still be no greater citadel spun from class consciousness and old-boy networking than the City of London. For Clara Furse to have navigated this maze and take the top job at the London Stock Exchange-and have come through the world of futures trading and a successful stint at a Swiss bank to get there-is a pretty amazing achievement.
Since taking the top post at one of the largest and influential exchanges in the world, at a time when London is vying to become the financial capital of the world, Furse has been most influential playing defense. She's fended off a number of runs at the LSE, including from the Deutsche Borse, Paris, Sydney, and the Middle East, and made efforts to keep the exchange as hunter rather than prey.
In doing so, the exchange became a place where it's still taking 65 percent of FTSE100 equity trades and running at a volume of 600,000 trades per day-5,000 per second, on the way up to capacity for 20,000 per second by October-with each trade executing in six milliseconds. This push for milliseconds is remarkable considering the blink of an eye takes 300 of them. Over the last year, Furse also in essence built out a complete back-office operation by purchasing the Borsa Italiana. Total cash raised on the exchange during its first quarter surged to $60 billion, and revenue clocked in at $350 million. Over the summer, Furse was made a Dame of the court.
But now the 51-year-old Canadian, born to Dutch parents, will need every bit of the guile, stamina and leadership ability that got her where she is in order to hold her post in the Mile. As the new year rolled in, LSE stock was riding high-at $35 a share-but as 2008 pressed on, the exchange's equity got hammered. Just as it seemed to be stabilizing at the beginning of September and the LSE was touting its tech upgrades, the exchange (and, presumably, Dame Furse's pride) took a painful and public body blow. On one of the most active days of the year in markets around the world-the Monday after Fannie Mae and Freddie Mac were rescued by Washington intervention-the LSE went down for seven hours because of, so it seemed as USB went to press, a "connectivity problem." The howls were legion, and as ZDNet blogger Larry Dignan put it, trader's also weren't happy with the LSE's lack of transparency on the issue. "Those traders weren't kidding. You'd never know there was an outage looking at the LSE's Web site," he posted. The LSE's share price, at press time, stood at $13.78.
Fox-Pitt Kelton's Andrew Mitchell says more time is needed to see how Furse will steer the ship, although he was speaking before the outage happened. "Quoted exchanges' share prices, year to date, are down by about 50 percent on average. The LSE is down just over 60 percent," he says, and facing increased competition. Mitchell's referring not just to other exchanges but to high-tech, low-cost newcomers like Turquoise, which is backed by Goldman Sachs and eight other investment banks, and Chi-X, controlled by Nomura. Some shareholders are grumpy that Furse didn't sell out when she had the chance.
But Turquoise and Chi-X are unproven, and as Toronto's Globe and Mail put it, Dame Clara has had a spectacular run. There's no reason to think she'll wilt now. "We won't really be able to judge the merits of the way the management team is steering the company until these points are played out," Mitchell says, taking the long-term view. Always good policy in the City, a complex thicket where rivals, grudges and history never really fade away. It's not a place for the faint of heart.
(c) 2008 U.S. Banker and SourceMedia, Inc. All Rights Reserved. http://www.americanbanker.com/usb.html/
