My Word is my Bond

Clara Furse, the CEO of the London Stock Exchange offered a vivid and revealing insight into the many functions of a modern stock exchange in a globalizing world in a talk I attended on the 24th of April.

The London Stock Exchange is right at the heart of global capital markets, the exchange plays host to more than half of Europe's largest companies and shares worth £3.2 trillion were traded on the exchange's platform in 2007. Over £44bn was raised in new listings last year - the equivalent of the cost of building sixty new Wembley Stadiums. What staggered me was the speed with which market trades can be accomplished. Nowadays, one trade is executed fifty times faster than the blink of an eye.

After outlining the colourful history of embryonic stock trading Mrs. Furse focused on the pivotal role that London seeks to play in providing efficient capital markets for businesses needing finance during an age of rapid globalization. Having fought off a takeover bid from the NASDAQ exchange and more recently completed the merger with Borsa Italiana, the LSE is now home to over seven hundred companies from seventy countries with nearly one hundred new listings in 2007. A sizeable number of businesses from the former CIS states are now listed on the London market.

Mrs. Furse answered a wide range of searching questions with aplomb. They ranged from her assessment of the impact of dark liquidity pools, whether social enterprises might eventually have their own LSE index, to the likely impact of sovereign wealth funds on global capital markets. One question asked whether the LSE would suffer in the event of a UK recession, the reply being that economic volatility is often good for trading volumes on the market and that despite the broader economic slowdown, there are still many new company listings especially from emerging markets. Indeed the credit crunch may well provide a boost to stock markets as financial institutions and other real-economy businesses look to improve their balance sheets by raising fresh capital from investors.