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IMA chief warns LSE to tread carefully on consolidation

13 July 2006  |  4283 views  |  0 London - Big Ben

In a letter to London Stock Exchange chief executive Clara Furse, the UK's Investment Management Association (IMA) has added its voice to concerns about the possible transfer of regulatory control of the exchange outside the country.

The letter follows remarks made last month by FSA chairman Callum McCarthy regarding a possible transatlantic take-over of the LSE by Nasdaq.

McCarthy warned a new combined entity might seek to achieve further benefits from rationalisation of its regulatory structure and could result in the LSE no longer being subject to UK regulations.

In his letter to Furse, Richard Saunders, chief executive of the IMA, states that the IMA shares McCarthy's concerns, especially as the FSA "plays no small part" in the running of the UK market operator.

Saunders says the IMA would have concerns if 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," states the letter.

Saunders says this would create "an undesirable fragmentation of the market".

The IMA says it would also be concerned if any new owner sought to "rationalise its existing business with that of the exchange without full consultation with market participants".

Speaking at the presentation of a set of positive first quarter results yesterday, LSE chairman Chris Gibson-Smith reassured the user community that the business would not be rushed into a merger. "London’s stakeholders do not want a combination of exchanges that might lead to...the import of unsuitable regulations and incompatible market models."

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