ALEX BRUMMER: LSEG broadens its horizons with Microsoft deal

The London Stock Exchange Group (LSEG) is not letting European rivals get the better of it.

A landmark deal with Microsoft adds a powerful £1.5 billion cornerstone shareholder to its register and is a long-term investment in its capabilities as a global trading and data powerhouse.

With that, CEO David Schwimmer – along with Nasdaq and Chicago-based CME – recognizes that the future lies in alliances with Silicon Valley technology.

The LSEG deal puts into perspective the recent bragging rights of Euronext CEO Stephane Boujnah.

He makes big claims for the superiority of his exchange network based on greater connectivity.

He calls the listing of Universal Music in Amsterdam instead of London a triumph for Euronext.

It’s disappointing given Universal’s EMI background and CEO Lucian Grainge’s British background.

Nevertheless, Boujnah had few answers to the fact that the value of new listings in London has more than doubled that on Euronext over the past year and that turnover in the City is higher than on all of Continental’s exchanges combined.

The equity stake and the presence of Microsoft tech Scott Guthrie on the LSEG board are eye-catching.

But it’s the digital underpinnings that should drive earnings a decade from now, though the LSEG is shy about giving forecasts.

That’s not the case with Microsoft, which says LSEG has committed to spending a minimum of £2.3bn on cloud computing over the next decade.

Much of what LSEG does is moving to the Microsoft cloud. Better revenues will result from the availability of LSEG apps on Microsoft platforms such as Teams, opening up new opportunities globally.

The deal is designed to improve LSEG-Refinitiv’s competitiveness with Bloomberg, including better messaging services.

There is a considerable contrast to be drawn. Euronext continues to focus only on tethering Europe. The LSEG will focus its Refinitiv, cloud and other data services on Europe, across the Atlantic and the rest of the planet.

China syndrome

One wonders how thoroughly Grant Shapps and the Department for Business scrutinized France’s Schneider’s £10bn bid for British software pioneer Aveva under the terms of the National Security and Investment Act.

As my colleague Mark Shapland’s reporting has shown, the relationship between Beijing and Schneider boss Jean-Pascal Tricoire is far from casual.

When this column suggested that the sale of the 40 percent minority in Aveva to Schneider could lead to technology transfer to Beijing, it elicited this response from the French company’s advisers: “As far as China is concerned, the joint venture you mentioned a few times basic low voltage products – it is not a digital company and there is no IP sharing.

It works in China for Chinese customers and exports very little. It’s not part of Aveva’s industrial software company.”

Could be. But as those who have worked closely with Beijing know, one of the main reasons China is eager to do business with the West is to gain access to advanced technology.

Under Tricoire’s leadership, Schneider turned himself into a China-focused digital systems champion. He helped this by moving to Hong Kong and befriending Chinese elites.

The FT has reported that the French company was trying to resist President Donald Trump’s attempts (still US policy) to distance itself from trade with China.

It may be just about acceptable for the UK to accept French command and control of software. However, giving China access to vital technologies through Schneider is unconscionable and goes against the dogma of the Tory government.

Law rate

By the snail’s pace standards of financial justice, the £10m fine imposed on Metro Bank for misrepresenting risk in its commercial loan portfolios in 2019 should be regarded as swift.

The mis-weighings, which resulted in a stock price collapse and the departure of flamboyant founder and chairman Vernon Hill, were first reported on these pages.

Former top executives Craig Donaldson and David Arden have also been fined for their knowing involvement in the breach. They are appealing the decision.

If the past is any guide, it could take years. Bankers are among the privileged litigants who can afford to stand up to regulators.