It turns out Downton Abbey isn’t the only British institution that has steadily infiltrated the USA over the past five years.
From mammoth mergers in New York to acquisitions in South Carolina and engaging policymakers in DC, the London Stock Exchange Group (LSEG) -England’s financial engine- has properly bought in to the American Dream.
No longer just a marketplace in the ‘square mile’ heart of London’s financial district, LSEG is rapidly empire building in the USA, morphing in to one of the top 5 global financial infrastructure players over just the last 5 years.
The 300 year old institution became known as the London Stock Exchange Group in 2007 when it merged with Milan Stock Exchange Borsa Italiana. Their global diversification strategy has since gained pace with a focus stateside under French CEO Xavier Rolet.
US employee-count has doubled from just two years ago, “Today we have over 500 employees across 8 states and Toronto, and we’ll add another 150 in the second half of this year,” Mark Benhard, LSEG’s Head of Media Relations in America, explained to Heat Street.
What’s driving LSEG’s growth? “A natural evolution driven by the vision of Rolet and Mark Makepeace (founder of FTSE International and now LSEG Group Director of Information Services)” observed Jonathan Jachym, the LSEG’s man on the ground in DC. “Given the size and scale of the US market they considered it the natural target for growth.”
CEO Rolet joined LSEG at the height of ongoing recession-related market volatility and a reduction in the number of companies going public. He knew the London Stock Exchange had to find other revenue sources, so he looked to the ‘special relationship’.
2007/8 changed things for everyone in the financial services industry, LSEG included. New regulations and mandates which focused on getting (and keeping) the economy stable meant that the way that financial services providers such as LSEG worked had to change, and fast.
To make the US financial system more transparent, companies were pushed to move from the old style of trading (brokers conducting business over phones in true cliché Wall Street style) to more transparent, standardized electronic processes.
‘Clearing’, which is the process of managing the trade from when it’s made through to settlement, became an important part of the recovery conversation.
This put Jachym, LSEG’s US Country Head and Head of Regulatory Strategy and Government Relations, front and centre. “Our current US growth is being shaped and driven by post-2008 reforms,” he said. “These financial services reforms were sweeping, one of the biggest components of G20 mandates was to move non exchange traded derivatives into a centrally cleared environment which makes the system safer.”
It wasn’t until 2012 that LSEG pounced, undertaking the mammoth acquisition of LCH, the largest clearing house in the world as a result of a merger between the London Clearing House and Paris-based Clearnet.
The LSEG now clears roughly 90% of the US market for bank-to- bank trading, and 80% of the US market for client-based interest rate swaps. That same year LSEG purchased the remaining 50% of FTSE that they didn’t already own from the publishing house Pearson.
Then in 2014 they bought Russell Investments, the market index compiler and asset manager, for $2.7 billion. This massive merger took the FTSE indices (a set of British stock market listings that show how well companies are performing) and married them with the Russell indices (a household name in the US that collates a similar catalogue of businesses; the Russell 200 is the list of the 200 fastest growing companies in the USA).
It was a move which embedded Europe’s oldest independent exchange deeply into US capital markets and created – via the new FTSE-Russell brand – a significant contributor to the London Stock Exchange Group’s overall revenue.
The next big move in the LSEG’s US takeover was again in information services. In 2016 they acquired Mergent inc, a South Carolina-based company which provides business and financial data on global publicly listed companies.
“2016 was a rough and exciting year for a lot of us” explains Jachym. “LSEG was no different.”
Talking of 2016, there was a lot of noise around the negative impact of Brexit, notably from LSEG CEO Rolet who told the Telegraph that Brexit would “be devastating to the economy of the United Kingdom” and provide an “advantage for Russia”, besides forcing the USA to intervene in Europe, “putting Humpty Dumpty back together again.”
Jachym wouldn’t be drawn much on the company’s feelings about Brexit a year on, saying only that “It’s a time of upheaval, our main focus is ensuring continuity for our customers.”
However, he was much more upbeat about the implications of Donald Trump’s election just months later,describing the administration as “very much aligned” with LSEG in key areas. “We’re focused on connecting businesses with investors and we’ve seen clear messages from this administration and from Congress that they’re streamlining the process of capital raising.
“We think this is good for businesses and good for markets. We’ve grown our presence here in Washington DC over the last two years and we’re constantly engaging with policy makers and this administration.”
So far 2017 has seen LSEG acquire US-housed Citi’s Yield Book and Fixed Income Indices; a mammoth deal which has further secured their status as a one-stop- shop for every stage in the trading process.
Their reputation as the best in the world keeps growing – over 125 companies based in the USA are now listed on the LSE and in this last week alone there has been four new listings from the USA.
Merger and acquisition activities have been 100 miles per hour (or kilometres, depending on which side of the pond you reside) in recent years, so what’s next on their agenda for US expansion?
The very embodiment of the American Dream: the go-getting pioneers of small business. “I see our appeal to and business with SMEs growing,” muses Jachym with a modesty that belies the significance of such a move.
With an estimated 28 million SMEs in America and self-styled “self-made” man Trump claiming he’ll lower taxes and simplify the tax code to relieve “the little guy” of regulation and red tape, it’s little surprise the sector is in their crosshairs.
The London Stock Exchange Group has made a home in the land of opportunity, and so far it’s not showing any signs of retreat.