The London Stock Exchange should seek to get in on the boom in special purpose acquisition vehicles, cryptocurrencies and green finance, says the LSE's former CEO Xavier Rolet.
In a paper, co-authored by Rolet from his perch as chairman at Shore Capital Markets, he says that the LSE must keep pace with innovations in markets around the world if it is to flourish outside the European Union and limit the damage from trade flows lost to EU centres.
One idea that has been mooted is to revisit the rules around special purpose acquisition companies (Spacs), which have gained rapid and considerable traction in the USA. In 2021 alone, 143 Spacs have raised c$43bn in the US, according to data from Refinitiv.
"The UK needs to promptly consider the Spac revolution," states Rolet. "Whilst there are significant differences between our markets and those in the US, the appetite for permanent listed capital on the part of ambitious UK and European entrepreneurs and innovators is no less than that of their American counterparts: ask the management teams at Spotify or Markit. Spacs represent a financial instrument that should not be overlooked and where agility could realise considerable benefits to credible British and European entrepreneurs and dealmakers."
Likewise, increased institutional interest in the bomming cryptocurrency markets is another area that merits serious consideration. The paper calls on the Uk Government to attract the "best brains" in the industry to help draw up provisions that would place London at the centre of a reputable and safe financial market.
"Doing so will not be easy, none of this stuff is, but it is essential to be well positioned, otherwise the crypto-currency market will pass the UK by," states the paper. "It is a good example of a policy area where independence allows us to be more agile, providing UK regulators actively construct and bring about a shared global regulatory framework, in conjunction with the world’s leading Central Banks. In this respect, agile financial services regulation needs to combine well with a functioning new immigration platform to attract and keep the best global talent in the UK."
On the issues of sustainable finance, Rolet says the government and the financial services industry need to be mobilised to capitalise upon the ground-breaking ideas that UK institutions and entrepreneurs are developing to contribute to solving the climate change challenge.
"Such a policy context needs ambition, vision, clarity of thought and the multi-faceted combination of linking universities and centres of innovation to equity capital markets," says Rolet. "In this respect, the appropriate reform of Solvency II could help enable insurance companies and pension funds to allocate material capital to the green revolution."