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Battle of London Exchanges Heats Up

Thursday, 19 Jul 2012 | 5:24 AM ET

The competition for initial public offerings in London has got more intense, with the first listing on a new rival to the London Stock Exchange (LSE).

NYSE Euronext launches London based listing.
NYSE Euronext launches London based listing.

In London on Thursday, the launch of NYSE Euronext’s first listing on its new platform – transport company Eurotunnel – coincided with well-publicized celebrations of Burberry’s 10-year anniversary of listing on the LSE at the latter exchange.

Eurotunnel , which operates the tunnel that links the UK to continental Europe through trains like the Eurostar, has cancelled its sterling listing on the LSE (its euro listing is in Paris) to move to the new platform.

Jacques Gounon, chief executive of Eurotunnel, told CNBC: “I think it will be much more simple. It will be only one share based in euro. We would like to give possibilities for investment funds based in London to have open and simple access to our shares.

“We believe that we can improve dividends in the future with this new platform. We are very proud to be the first. We want to be at the edge of technology.”

LSE CEO: Liquidity & Expertise Continue to Reside in London
Xavier Rolet, CEO at the London Stock Exchange, told CNBC that the LSE has the right balance of regulation and oversight and that liquidity and expertise continue to reside in London.

This is the first real competition for listings in London that the LSE has faced in more than three centuries of trading in some form. Of course, Euronext’s presence is much smaller than the LSE, which has close to 2,600 companies listed on the main market and the Alternative Investment Market (AIM).

Xavier Rolet, chief executive of the London Stock Exchange Group , told CNBC: “We have always welcomed competition. This is what makes London great, the diversity of offering.”

Dominique Cerutti, president & deputy chief executive officer of NYSE Euronext , told CNBC: that the exchange is holding talks with several “issuers and clients in domestic markets” such as France and Belgium looking to access the London market, as well as international companies looking for an alternative to list in London.

The market for initial public offerings has stagnated around the world as uncertainty about the global economy permeates its stock markets.

NYSE Euronext: The IPO Market has Been Tough
"It takes time to make sure issuers and companies understand what is our offering and the value. It is also linked to market conditions, the IPO market has not been that great lately because of market volatility," Domnique Cerutti, president and deputy CEO of NYSE Euronext, told CNBC.

Cerutti said: “The IPO market has not been that great because of market volatility…it’s starting again and we expect the second half of the year to be much better.”

Rolet was also confident about the end of 2012. He told CNBC: “Despite cyclical stress, we are comfortable and cautiously optimistic for the future. The IPO pipeline is very good for the fall.”

They both highlighted the continuing strength of the smaller business sector, as small and medium enterprises (SMEs) find it difficult to borrow from banks and turn to capital markets.

The LSE, which has recently announced a new cross-quotation pact with Singapore Exchange, said Wednesday that its core capital markets business has suffered following low trading volumes this year. Total revenue for the first quarter of 2012 rose by 10 percent to 209.5 million pounds ($326 million).

There has been an explosion of mergers and acquisition activity between exchanges around the world. The LSE is completing a deal to purchase a majority stake in clearing house LCH Clearnet – but a proposed merger with Canadian stock exchange TMX was stymied last year.

“Some projects in the sector have failed but consolidation is continuing. Our industry does have consolidation and the path is not clear. Importantly, London remains globally the most attractive place to do business if you have capital or need capital to invest,” Rolet said.

London’s reputation as a financial center has come under attack in recent weeks amid the developing scandal over manipulation of the London inter-bank offered rate (Libor). Rolet said the row was “unrelated” to the LSE’s activities but added: “There’s no denying that the controversy and the failures that have happened in some areas have reflected badly on the financial services industry. The positive side of finance is about providing capital and that’s what we discuss in our boardroom, not Libor which is not our responsibility.”

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