“For the long-term, for the financial centre for China? We view Shanghai as the financial centre for China,” said David Schwimmer, chief executive officer of the London Stock Exchange (LSE), at the Sibos conference in London this week.
On September 13, the LSE sent a letter to the Hong Kong Exchanges and Clearing Limited (HKEX) outlining why the board had rejected the proposal from the Asian exchange to acquire the entire share capital of the LSE.
“Our planned acquisition of Refinitiv meets LSE’s strategic objectives across its businesses which the board believes to be critical for a leading financial markets infrastructure provider of the future. In stark contrast, the high geographic concentration and heavy exposure to market transaction volumes in your business would represent a significant backward step for LSEG strategically,” the letter read.
But Schwimmer believes great opportunity lies in Shanghai as capital controls are rolled back across China.
“If you look at transformation of China, and the country’s capital markets over the past fifteen years or so, it has been nothing short of extraordinary. We view the capital controls around the Chinese market as constantly evolving and the trend is that they are slowly but surely being removed,” he said.
In June the LSE launched the Shanghai -London stock connect, allowing Chinese A shares to be traded outside of China under international trading rules and free from quotas. Only one company has come forward so far, but another is in the pipeline, according to Schwimmer.
“The first one we think has been a success. If you look at the discount relative to the A share trading, the discount on the London GDRs is a lower discount, i.e. a tighter discount relative to where shareholders could get for example that Hong Kong Stock Connect,” he said.
Schwimmer said the LSE had looked at its market data pricing, but it was in line with its European peers.
“If you look back overe the last fifteen years, our pricing for market data has gone up below inflation levels. And as you know inflation levels have been pretty low,” he said.
When asked whether the pricing of the LSE’s market data would remain at its current levels in a post-Refinitiv world, Schwimmer said he believed it would.
“The driver of the Refinitiv transaction is not about creating market power for data or data distribution. There are very attractive synergies across both the capital markets business, and the data business, but when I’m talking about the data business, I’m not talking about market data,” said Schwimmer.
“For example, Refinitiv has a very attractive, very substantial data set around ESG. The market community is very familiar with how important ESG is going to become.”