As data becomes the most valuable commodity in the new capital markets era, should the next chief executive of the London Stock Exchange come from a technology firm ?
Yesterday the London Stock Exchange Group announced that chief executive Xavier Rolet will step down by the end of December 2018. The group said that during his tenure its market capitalisation has risen from £800m ($1.1bn) to almost £14bn today. The board is now initiating a process to find a successor.
Patrick Young, chief executive of Exchange Invest, said in his daily email newsletter: “The value increase even at a more realistic non-acquisitive expectation premium has been hugely significant and Xavier deserves to be saluted for this vast achievement, unprecedented in the considerable history of the LSE. Rolet transformed LSE with a vast swathe of good deals. The only worry is how well he integrated anything he bought - exhibit one being the LCH’s decrepit technology which has still not been updated.”
Analysts at KBW said in a note: "We don't think this news will shock LSE investors, as Rolet had planned to step down from the role if the merger with Deutsche Börse was approved. Rolet has led LSE for nine years, and is very well-respected by the investment community; filling his shoes will not be an easy task for the board."
Rolet became chief executive in May 2009, less than two years after Apple first launched the iPhone and before Facebook went public in 2012. Since then the world has been transformed in terms of the increase in the amount of data generated and the decrease in the cost of storage and computing power to analyse all this new information. Eric Schmidt, then-chief executive of Google, said at a conference in 2010 : "From the dawn of civilization to 2003, five exabytes of data were created. The same amount was created in the last two days."
Consultancy Celent said in a recent report, Emerging Trends in Emerging Data, that these changes raise the question of whether data is a new commodity, or whether the same piece of data in two different hands, or prepared in two different ways, has different value.
Brad Bailey, Research Director at Celent’s Securities and Investments Group, said in the report: “In a time when the incremental value of investment alpha is life or death the ability to glean insight from data is the essential role of the capital markets.”
This view was echoed by Tom Doris, chief executive of OTAS Technologies, who has said that the ability to mine trading data created by new regulations will become financial firms’ most valuable asset.
The London Stock Exchange has privileged access to data thanks to its role at the centre of the trading world and also in post-trade, thanks to its clearing business.
Data is giving rise to a new economy and will be as important to this century as oil was in the twentieth century according to a recent briefing in The Economist. The magazine said: “Flows of data have created new infrastructure, new businesses, new monopolies, new politics and—crucially—new economics. Digital information is unlike any previous resource; it is extracted, refined, valued, bought and sold in different ways.”
In order to emerge as a winner from this new economy the exchange needs to find someone who can unlock these new data opportunities. So the board should think big and look outside the traditional hunting grounds of investment banking and finance and widen the search to technology firms and data specialists.
Tycoon John D Rockefeller exploited the oil economy and became the world’s first billionaire. He said: “If you want to succeed you should strike out on new paths, rather than travel the worn paths of accepted success.”
A lesson for the LSE.
