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Fears over change of ownership

The IMA represents the UK-based investment management industry. Our members include independent fund managers, the investment arms of retail and investment banks and life insurers and the mana- gers of occupational pension schemes.

They are responsible for the management of approaching 3tn of funds (based in the UK, Europe and elsewhere), including authorised investment funds, institutional funds such as pension and life funds and a wide range of pooled investment vehicles. Our members are therefore major customers of the exchange.

The IMA has noted the statement published on June 12 by FSA chairman Callum McCarthy regarding the regulatory implications of a change in ownership of the London Stock Exchange.

We agree with his analysis of the issues and would have concerns if in the longer term the exchange was no longer subject to UK regulation as a recognised investment exchange.

As users of the London Stock Exchange, our members consider that the market works well for participants, that is, issuers, members and end-investors.

The regime is based on market-developed solutions that have evolved and generally kept pace with the sophistication of the market. The FSA plays no small part in this.

By virtue of its role as competent authority for listing and, more specifically, through its oversight of the secondary market activities of the exchange, there has over time developed a well-judged regime that offers appropriate, suitably flexible regulation that takes account of the very different profile and needs of the market users.

This market-led approach to development has also, of course, contributed to a significant pooling of liquidity through the exchange, which operates to the benefit of all market users.

Any change in ownership should not prejudice these strengths and we would have concerns in particular if:

a: The FSA’s role and influence were diminished as a result of encroachment by non-domestic regulatory authorities. Additional or onerous regulatory burdens introduced from another jurisdiction in respect of companies admitted to trading on the exchange could lead to those companies seeking alternative venues for listing. This would create an undesir- able fragmentation of the market which would be to the detriment of users of the market and the end investor.

b: The trading arrangements provided by the exchange, including the admission to trading of securities, were subject to non-market-led change that does not fully take into account the needs of end-users of the market or

c: Any new owner sought to rationalise its existing business with that of the exchange without full consultation with market participants and the endorsement of users of the market. Inappropriate changes to the trading platform, rules and services provided by the exchange could lead in time to the exchange becoming a less attractive place to do business, relative to other venues, resulting in a loss of issuance activity and a reduction in the available pool of liquidity.

In the event of any offer to acquire the exchange, therefore, the IMA would formally seek assurances on these matters from the bidder.

Richard Saunders
Chief executive
Investment Management Association


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