Ex LSEG boss slams London stock market ‘gimmicks’
The London Stock Exchange Group (LSEG)’s former boss Xavier Rolet has blasted stewards of UK capital markets for focussing on “gimmicks and quick headline-grabbing fixes” to liquidity levels.
Officials at the London Stock Exchange and at the Treasury have mooted possible reforms to savings as part of a bid to revive capital markets.
London Stock Exchange chief Julia Hoggett has suggested a new “Tell Sid” advertising campaign, which encouraged Brits to take up shares in British Gas during the years of Margaret Thatcher’s government, could get more people to invest in UK assets.
But Rolet, who served as chief executive of the LSEG between 2009 and 2017, said “assorted regulatory decisions” made by policymakers had dried out liquidity levels, adding that City chiefs had to reconsider tax and regulation to boost capital markets.
“Stock exchanges are easy targets and the London Stock Exchange perhaps lost track of its origin as a mutually owned company run by its founding members: market-makers, or jobbers as they were called once,” Rolet wrote on a post on LinkedIn.
“The truth is that London built its historical financial supremacy on one basic concept: no matter what your business was and where in the world you operated, you could always find a financing or risk management solution in London with firms willing to commit their own capital to provide transactional certainty.”
“To my knowledge, London remains the oldest and only equity market in the world where an equity market-making framework exists for SMEs: AIM.
“Its stark and regrettable decline is often laid at the door of the London Stock Exchange Group with recent and rather callous calls for its break-up by the very policymakers whose policies did so much to hasten the decline of liquidity in UK and European-listed markets.”
Rolet’s post came as a response to Resolve AI company founder Daniel Wagner’s sharp criticism of Hoggett, in which he said calls for a new retail investing campaign represented a “distracting PR stunt” that would not help the UK’s fastest-growing companies.
‘Rethink rules to boost stock markets’
Rolet, who is now chairman of investment group Prytek, appeared to agree as he urged officials to scrap regulation that has “piled on” equity markets.
He also laid the blame on the “UK Financial Press”, “City grandees” and the Treasury, which has come up with “puzzling fixes… like the creation of a sovereign fund (unexpected from a major issuer of sovereign debt !)”, for overlooking more serious issues around low liquidity levels.
“Liquidity in public markets is provided by pension funds, insurance companies, institutional managers and of course, private investors.
“The UK financial transaction tax called stamp duty already accounts for low retail participation.
“By barring pension funds and insurance capital investment entrants (CIEs) from investing in listed equities Solvency II forces them to short the real economy and load up on sovereign debt instead.
“The revitalization of UK markets requires an urgent recalibration of their regulatory and fiscal framework.”
Chancellor Reeves is set to deliver her next Mansion House speech in a fortnight, where she will likely outline new policies aimed at reviving capital markets.
Among expected reforms is removing powers from the Financial Ombudsman Service while Reeves is also expected to celebrate agreements that encourage pension funds to invest in the UK.
But City leaders fear the Chancellor could raise taxes on investors later this year as government spending commitments continue to surge.