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LSE mulls demutualisation

Our Bureau

MUMBAI, Feb. 25

THE London Stock Exchange (LSE) is planning to demutualise by March 15, Mr. Ian G. Slater, Deputy Chairman, LSE has said.

``This step will help us move on from being answerable to members to being like any other public company, focussing more on profits than on settlement-run business. You can see it happening worldwide and it is an effective response to the fast changing g lobal marketplace whereby exchanges become a new force able to compete with other industries,'' Mr. Slater said.

In an informal chat with Business Line, Mr. Slater said that this was a significant development which would strengthen its standing globally. LSE has been gearing up towards this for over two years.

``As the exchange prepares for demutualisation, we will continue to develop our trading services for both investors and issuers to ensure they remain among the most competitive and attractive of any market in the world,'' he said.

He stressed the need for traditional stock exchanges to be flexible to respond to change, the pace of which is increasing at an astounding rate. This is an important attribute for survival.

``The fact that we have spent over 100 millions in the last few years on electronic trading and the fact that we are going to demutualise are steps one has to take to survive. Not only do you survive but you also grow. You build up a brand name. The worl d is getting smaller with more and more stocks from all our countries being traded in different countries. One can't be a dinosaur,'' he said.

According to him, LSE's objective in reaching out with such memorandum of co-operation is to compliment the home market. He said setting up overseas subsidiaries was not the answer. ``We are not looking at this avenue as it would disrupt our goal. What w e do is set up offices and provide something akin to `after sales' services in that country.''

Expanding on the theme, Mr. Slater advised that while it was easy to get into any market, one should be able to get the liquidity of that market, to be able to make a difference.

Commending the Reserve Bank of India's decision in granting permission to Indian companies to make international share offers through depository receipts, he said it was an important step in liberalisation.

``Depository receipts (DRs) _ be they GDRs or ADRs _ provide a streamlined mechanism for companies to access these new sources of capital to fund their growth strategies and for investors to seek returns and spread risks across a wider international por tfolio,'' he explained.

Since they were first introduced, in August 1994, 113 GDRs and ADRs have been listed in London, from over 30 countries. However, Mr. Slater maintained that it would be wrong to see this as an alternative to listing on the domestic market.

``DRs offer a complementary method of meeting the demand for capital and are an effective response to the ever changing global market place,'' he added.

Yet, as this route is aimed at professional and not the individual investor, it also makes listing on LSE easier compared to say on NYSE or Nasdaq.

``And, LSE, at its heart, is more international than any other stock exchange, including NYSE or Nasdaq,'' he said.

Mr. Slater said that not less than 18 companies had decided to seek a listing on the LSE, raising around $2,400 millions in the process.