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DISCLAIMERThis PDF is an exact copy of the Annual Report and Accounts of London Stock Exchange Group plc asprovided to shareholders. The audit report is set out on page 63.
The maintenance and integrity of the London Stock Exchange Group plc website is the responsibility ofthe directors; the work carried out by the auditors does not involve consideration of these matters and,accordingly, the auditors accept no responsibility for any changes that may have occurred to thefinancial statements since they were initially presented on the website.
Legislation in the United Kingdom governing the preparation and dissemination of financial statementsmay differ from legislation in other jurisdictions.
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Delivering on our strategy
Getting in shapeLeveraging our assets
Developing opportunities
Annual Report 2011
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Welcome to our Annual Report
London Stock Exchange Group sits at the heart ofthe worlds nancial community. The Group provides
a broad range of international equity, bond and derivativesmarkets, including London Stock Exchange; BorsaItaliana; MTS (Europes leading xed income market);IDEM derivatives; and Turquoise, offering pan-Europeanlit and dark equity trading, together with equity derivativesfrom June 2011.
Through its markets, the Group offers domestic and
international businesses unrivalled access to Europescapital markets. The Group is a leading developer ofhigh performance trading platforms and capital marketssoftware and also offers its customers around theworld an extensive range of real time and referencedata products and market-leading post trade services.
Headquartered in London, with signicant operationsin Italy and Sri Lanka, the Group employs over
1,500 people worldwide.
Further information on London Stock
Exchange Group can be found at
www.londonstockexchangegroup.com
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Governance
Groupfinancialstatements
Otherinformation
BusinessReview
Overview
01
For further information visit: www.londonstockexchangegroup.com
London Stock Exchange Group plc Annual Report 2011
IntroductionAn overview of our business, the marketsand regulatory environment in whichwe operate, our vision and strategy,and statements from our Chairmanand our Chief Executive.
Highlights 02Groupataglance 04W hatwedobusinessmodel 06Marketpositionandoutlook 08Chairmansstatement 10ChieExecutivesreview 12Strategyinaction 14
Business ReviewMore detail on each of our divisions,our performance, our approach to ouremployees, other stakeholders and ourwider community and the principalrisks and uncertainties that couldaffect our business.
Segmentalreview 15CapitalMarkets 16PostTradeServices 20InormationServices 22TechnologyServices 24Financialreview 26Ourwiderresponsibility 30Principalrisksanduncertainties 32
GovernanceAn introduction to our Board ofDirectors, our approach to corporategovernance and how we rewardperformance, along with otherstatutory and regulatory information.
BoardoDirectors 38CorporateGovernance 40AuditandRiskCommittee 46RemunerationReport 48DirectorsReport 58Directorsresponsibilities 62orthefnancialstatements
Group financial statementsDetailed nancial information settingout our performance for the yearand nancial position at year end,together with the report thereon byour independent Auditors.
AuditorsReport 63Consolidatedincomestatement 64ConsolidatedStatemento 64ComprehensiveIncomeBalancesheets 65Cashowstatements 66Statementochangesinequity 67Notestothefnancialstatements 68Financialrecord 101
Shareholder informationAn explanation of how trading marketsare structured, a glossary of termsused in this report and other informationfor shareholders.
Marketstructures 102Glossary 104Financialcalendar 106Investorrelations 107 Investorrelationscontacts 108
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2007
2008
2009
2010
349.6
564.4
671.4
628.3
Total Income (+7%)m
2007
2008
2009
2010
56.2
73.1
74.2
60.1
Adjusted Earnings per share* (+23%)Pence
2007
2008
2009
2010
185.6
289.0
340.7
280.3
Adjusted Operating Profit* (+22%)m
2007
2008
2009
2010
18.0
24.0
24.4
24.4
Dividends per share (+10%)Pence
02 Overview
London Stock Exchange Group plc Annual Report 2011
Highlights
Financial highlights
* London Stock Exchange Group uses non-GAAP performance measures as key nancial indicators as theBoard believes these better reect the underlying performance of the business. See non-GAAP denitionson page 101 for further information. Adjusted operating prot and adjusted earnings per share excludeamortisation of purchased intangibles, goodwill impairment and non-recurring items.
Year ended 31 March
2011 2010 Variance %
Total income 675m 628m 7
Adjusted operating prot* 341m 280m 22
Operating prot 283m 182m 56
Adjusted prot before tax* 296m 242m 22
Prot before tax 238m 144m 65
Adjusted basis earnings per share* 73.7p 60.1p 23
Basic earnings per share 56.4p 33.8p 67
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Capital Markets 281.5
Post Trade Services 150.6
Information Services 184.7
Technology Services 48.6
Other 9.5
Group income by segmentm
Governance
Groupfinancialstatements
Otherinformation
BusinessReview
Overview
03Overview Highlights
For further information visit: www.londonstockexchangegroup.com
Operational highlights
Good progress has been made in the year in delivering on our strategy to improveoperational efciencies and leverage Group assets:
MillenniumIT high performance trading system successfully implementedfor Turquoise and for the UK cash equities market
Stabilisation of share of order book trading of UK equities following tariffchanges and reductions to post trade costs
Migration of the IDEM market to the SOLA derivatives platform
Development of pan-European equity derivatives through Turquoise
New customers won by MillenniumIT, including the Johannesburg Stock Exchangeand the Mongolian Stock Exchange
Post Trade Services extended; growth in underlying volumes and active treasurymanagement at our CCP operation improved net treasury income
New real time data pricing and separate, low cost post trade price and tradinginformation service, providing users with further choice, facilitating greatertransparency of such data and helping market data distributors provideconsolidated data solutions
Launch of new information products, including UnaVista Conrmationand Swaps Portals; and new technology services with further data centreco-location enhancements
Services developed for retail investors: lower cost trading through PrivateClient Broker incentives, lower cost real t ime data and additional bondsadded to retail bond platform (ORB)
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04 Overview
London Stock Exchange Group plc Annual Report 2011
London Stock Exchange Group is a leading diversifed exchangebusiness, incorporating Borsa Italiana, London Stock Exchange
and MillenniumIT. The inormation below and on the next pageprovides an outline o our business model.
Group at a glance
Total income contribution Sub-segment Main types of revenue
Capital MarketsAt the heart of what we doare our markets in Londonand Italy and increasinglythroughout Europe
281.5 million2010: 295.3 million
42%Total Group income
Primary Admission fees for initial listingor raising further capital
Annual fees for securities tradedon our markets
Secondary Fees based on value traded (UKequities and Government bonds)or number of trades (Italian equities,
retail bonds and derivatives)
Other Membership fees to access any ofour trading markets, such as SETS
Post Trade ServicesWe offer open and efcientclearing, settlementand custody services. Ourpost trade business supportscash equity, derivative andxed income markets
150.6 million2010: 116.2 mi llion
23%Total Group income
Clearing Fees based on trades or contractscleared, and Central Counterparty(CCP) services provided
Net treasuryincome
Net interest and fees on cashand securities held for margin
and default funds
Settlement Revenue mostly comes from thesettlement of equity and xedincome trades
Custodyand other
Fees are charged on the issuance ofan equity or xed income asset, whendividend and interest payments aremade, and on any corporate action
Information ServicesWe sell real time and referencedata to market users
184.7 million2010: 169.3 mi llion
27%Total Group income
Data charges Fees primarily based on numberof terminals taking our real timeprice and trading data
Other information Fees vary based on the nature of serviceprovided, for example a licence feeis paid to gain access to the SEDOLsecurities numbering system
Technology ServicesOur businesses and customersdepend on technology thatis secure and performs tohigh levels of availabilityand throughput
48.6 million2010: 39.4 million7%Total Group incomeNote: Other income 9.5m, 1% Total Group Income
MillenniumIT Sales of technology services Distribution of IT hardware and software
in Sri Lanka and to internationalcapital market customers
Technology Fees for network connectionsand systems supplied by
Group businesses
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Overview Group at a glance
Customer profile Highlights KPIs
Companies from 70 countries around theworld have come to our markets to raisemoney for growth, together with issuersof bonds, ETFs and other assets
185 new companies joined our marketsin the year
New admission to trading service forDepositary Receipts
Numberocompanies
onourmarkets
2,9382010: 3,046
Capitalraisedbynew
andurtherissues
40 billion2010: 77 billion
Banks and brokers worldwide, trading onthe Groups equities, derivatives and xedincome trading platforms
Share of trading stabilised during theyear, at 63.5 per cent in the UK, and84.0 per cent in Italy
MTS, the trading platform for Governmentbonds, total value traded up 51 per cent
Averagenumbero
equityorderbook
tradesperdayinItaly
257,0002010: 252,000
Averageequity
valuetradedper
dayinLondon
4.7 billion2010: 4.6 billion
Banks and brokers worldwide Integration of London and Italianmarkets has facilitated cross-membership
Memberfrmsconnectedtoourmarkets
5322010: 530
171 members, mainly banks andbrokers, over 40 per cent of whichare based outside Italy
Introduction of guarantee servicefor the interbank collateralised depositmarket in Italy
Numberoequityandderivative
contractscleared
115.8 million2010: 107.7 million
Clearing members Active treasury management of margins from increased derivatives
and xed income trading in Italy
Averageinitialmarginheld
6.9 billion2010: 4.5 billionWide range of Italian and internationalbanks and brokers for both on marketand OTC trades
Settlement rate of 99.5 per cent exceedsthe Bank for International Settlementsquality standards
Settlementinstructionshandled
69.8 million2010: 83.9 million
Issuers of equity and xed incomeproducts (mostly Italian based)
Government and corporate bondissuance remained at high levels
Sale of Servizio Titoli in May 2011
MonteTitoliscustodyassets
undermanagement
3.02 trillion2010: 2.87 trillion
Service providers, such as Bloombergand Thomson Reuters, that incorporateour data with other information and sell
onto users
Introduction of direct billing andnon-display tariff initiatives
Numberoproessionalterminalstakinggroup
data(93,000Londondata;139,000Italiandata)
232,0002010: 235,000
Our customers vary based on theservice provided, including fundmanagers, traders, retail brokersand market makers
Acquisition by FTSE of the FXI Xinhuabusiness providing indices for China(previously a joint venture)
Numberoinstrumentscontainedinour
SEDOLMasterfle
19 million2010: 10 million
Other London Stock Exchange Groupdivisions, other exchange groups andcapital market clients, banks, IT andother large Sri Lankan companies
MillenniumIT has entered into agreementsto provide systems to the JohannesburgStock Exchange and the MongolianStock Exchange
LatencyonUKtradingplatorm(at average
o99thpercentile)
113 microseconds2010: 1.4 milliseconds
Banks, trading rms and depositoriesin Europe, North America, Africa and
Asia-Pacic region
Implementation of Millennium Exchangetrading system for Turquoise and UK
cash equities market
AvailabilityoUKequitymarketduringtheyear
99.83% uptime2010: 99.84%
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06 Overview
London Stock Exchange Group plc Annual Report 2011
What we do business model
We provide services to a broad set o clients across a rangeo asset classes and unctions. This section provides an overview
o the Groups activities and their inter-connections.
More information SeetheSegmentalReviewsection
(pages15to25)oranupdateondevelopmentsineachmainbusinessarea.
ReadtheFinancialReview(pages26to29)ordetailsobusinessperormanceoverthepastyear.
Information & Technology Services
Our central economic function is to bring together companiesseeking capital with investors from around the world.
Primary marketOur primary markets in London and Italy provide companiesfrom around the globe with cost efcient access to someof the worlds deepest and most liquid pools of capital.
Initial Public Offerings(IPOs)99 (2010: 50)
Companies on our markets2,938 (2010: 3,046)
Market capitalisation
2.4 trillion(2010: 2.3 trillion)
Amounts raised 13.1 billion in new issues
(2010: 3.9 billion) 27.2 billion from
further issues(2010: 72.6 billion)
ETFs and ETCs listed 1,345 (2010: 861)
Capital Markets
Real time data
We supply real time prices and trading data creating thetransparency and liquidity that are essential for marketusers. This data is of high value, used and referencedby market participants and other trading services as itis price forming information. As well as providing feedsdirectly to clients, we also distribute through providerssuch as Bloomberg and Thomson Reuters. They incorporateour data with other information and sell to trading rms,investors and institutions around the world.
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Overview What we do business model
The Group provides afull range of Post Tradeservices. Based in Italy,CC&G provides clearing
services and Monte Titolipre-settlement, settlementand custody services.CC&G will provideclearing services forTurquoise Derivatives.
More Post Tradeinformation is providedin Market Structures,pages 102 to 103.
EquitiesOur systems allow ourmembers to electronicallytrade equities listed on ourmarkets. The majorityof trading takes placeon our Main and AIMmarkets both in Londonand Italy. ThroughTurquoise (acquired in
February 2010) traderscan now also accesspan-European andUS equities.
Fixed incomeThe Groups MTS andMOT businesses provideplatforms for the tradingof Government andcorporate bonds. InFebruary 2010, theGroup launched a newUK electronic order bookfor bonds, modelled on
the Italian MOT retailbond market whichprovides access forretail investors.
DerivativesOur experience of runningour primary markets hasenabled us to developderivative markets forthe trading of emergingmarket equity derivatives,particularly Russian. IDEMis our derivatives marketfor Italian equities, and
Turquoise will launchpan-European derivativesfrom June 2011.
Other information
To facilitate efcient trading on our markets, we havedeveloped a number of other reference, desktop andworkow products, which we make available to institutions,traders, retail brokers and market makers including:
SEDOL unique security identier numbering system UnaVista trade matching and reconciliation service RNS Regulatory News Service Proquote market data system FTSE index provider (joint venture with The Financial
Times Ltd)
Technology
Electronic trading in London has developed signicantlysince rst introduced by Big Bang in 1986. Now all ofour businesses depend on technology that is secure, stableand performs to high levels of availability and throughput.The trend towards high frequency, highly automatedtrading continues and we are investing to increase thespeed and capacity of our trading services, as well asto provide new functionality, such as that required fordark pool trading. With the acquisition of MillenniumIT,we have an agile, efcient, in-house IT developmentcapability that will serve the Groups capital marketsbusinesses. MillenniumIT also sells and licences exchangerelated technology and services to capital marketsbusinesses across the globe.
Post Trade Services
Secondary marketOur systems provide fast and efcient trading, allowing investors and institutions accessto UK and Italian equities (as well as European and US equities through Turquoise),international depositary receipts on our International Order Book, European corporate
and Government bonds, and equity and index derivatives (Italian, Norwegian and Russian).
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4.9
4.9
7.0
5.1
4.3
4.0 4
.1 4.4 4
.5
3.7
4.9
5.0
LSE daily value traded
5.2
4.9
4.9
7.0
5.1
4.3
4.0 4
.1 4.4 4
.5
3.7
4.9
5.0
8.0
63.2
61.4 6
2.1
63.7
63.2
62.4
64.5
63.4
63.1
65.1
64.1
65.2
64.4
LSE order-book value traded and share of trading
Mar2010
Apr2010
May2010
Jun2010
Jul2010
Aug2010
Sep2010
Oct2010
Nov2010
Dec2010
Jan2011
Feb2011
Mar2011
10%
20%
30%
40%
50%
60%
70%
80%
90%
1AverageDailyValuetradedbn
2
3
4
5
6
7
8
9
FTSE 100
Mar
2009
Jul
2009
4,000
3,500
4,500
5,000
5,500
6,000
6,500
Nov
2009
Mar
2010
Jul
2010
Nov
2010
Mar
2011
FTSE MIB
Mar
2009
Jul
2009
14,000
12,000
16,000
18,000
20,000
22,000
24,000
Nov
2009
Mar
2010
Jul
2010
Nov
2010
Mar
2011
08 Overview
London Stock Exchange Group plc Annual Report 2011
Market position and outlook
Exchanges provide the primary location or capitalraising, transparent price inormation, trading acilities
and post trade services that capital markets need inorder to unction efciently.
During the year a number of Eurozone countries credit ratingswere downgraded, notably Greece, Ireland and Portugal. Thishad a signicant impact on the level of trading in many sovereign
debt products. ECB initiatives and Government support havehelped stabilise the position and we saw some recovery in xedincome trading volumes in the latter part of the year.
Looking ahead, we believe that these improvements, alongwith other structural changes, indicate that a steady recoveryin secondary market activity is underway.
Exchanges operate on an increasingly international basis,in an environment of continued globalisation of capital owsand a need to provide clients with efcient services on a widerglobal basis. Against this backdrop, in February this year, weannounced our planned merger with TMX Group which willcreate the worlds leading listing venue and the fourth largestexchange by revenues. We believe that a merger with TMXis strategically compelling and will create a more diversied
business with greater scale, scope, reach and efciencies,and exposure to broader economic inuences.
During the year, principal global indices have continued toshow strength leaving behind the lows of early 2009 (graphsbelow). Furthermore, equity trading levels have also startedto show an improvement.
Evolution in our markets continues to be driven by structuralshifts in the economy and wider geopolitical environment,regulatory change and technological innovation. For anexplanation of Market Structures, see pages 102-103.
Economic conditionsThe past year has been characterised by further globaleconomic recovery although some uncertainty continues toexist in the market, which is potentially constraining investorcondence and growth. This includes the effects of the tragic
Japan earthquake, unrest in North Africa and the Middle Eastwith related concerns over possible contagion into other developingmarkets, and the continuing sovereign debt concerns in someEurozone countries. Our own domestic economies, in the UKand Italy, remain sluggish as Governments restrict spendingin order to balance their books.
This year, we have experienced increased numbers of initialcapital raisings on our international markets as companiesin developing markets start to benet from the recovery.We expect this trend to continue as these markets growand companies fund further expansion. Our position asthe pre-eminent global listing brand means the Group iswell positioned to compete and benet from this growth.
Despite the mixed market conditions, our strategy has successfullydelivered a stable share of value traded over the year at an average63.5 per cent for UK cash equities and 84.0 per cent for Italianorder book trading.
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Overview Market position and outlook
Regulatory DevelopmentsIn recent years, regulation and technology have transformed thecapital markets into a global marketplace by removing the barriersto cross-border trading and lowering the costs of entry for newproviders of trading services. This has led to greater competition:there are now over 40 active equity trading venues in Europe alone.
In part due to G20 commitments, regulation of nancial servicesremains a key priority of national and EU Governments and islikely to have signicant effects on the environment in which
we and our customers operate.European regulatory reform is proposed across a broad rangeof activities, including:
Markets (MiFID II) increased pre and post trade transparency for all non-equity
asset classes, including bonds and derivatives; improved quality of post trade data in order to counter the
effects of fragmentation and enable consolidation of such data; increased harmonisation of standards across regulators
and trading venues; increased regulatory oversight of the activities of non
pre-trade transparent trading venues, broker crossingsystems and OTC trading;
assessment of the impact on EU markets of proprietary
trading and high frequency trading strategies; and importance of SME funding and markets.
OTC Derivatives & Clearing (EMIR) a move to mandate the use of CCP services for OTC
derivatives in order to better manage risk; harmonisation of European CCP standards and
requirements; and a move to mandate the reporting of OTC derivative
trades to Trade Repositories operating subject toharmonised standards.
Post trade measures to harmonise the operation of central securities
depositories and harmonise the law related to the holdingand disposition of, and the possession of the rights attaching
to securities, held through securities accounts.
Short selling a regulation to restrict the ability of investors and market
participants to undertake short selling and to imposesettlement performance measures.
Capital Requirements (CRD4) further changes to the Capital Requirements Directive aimed
at increasing the resilience of the banking sector, includingthe introduction of liquidity standards and a leverage ratioand the strengthening of capital requirements forcounterparty credit risk.
In addition, it is expected that there will be EU proposalson the following areas: corporate governance, market abuse,issuer transparency, nancial transaction/activity taxesand crisis management, all of which may affect Groupoperations to some extent.
In the UK, the regulatory regime is in the process of beingrevised. The Government proposes creating a Financial PolicyCommittee responsible for considering macro-systemic risk,and transferring the micro prudential functions of the FSA to
the Prudential Regulatory Authority (PRA), a new subsidiaryof the Bank of England, and the conduct and markets functionsof the FSA (including the UKLA) to a new body, the FinancialConduct Authority (FCA). The FCA will represent the UK atESMA, the new European Securities and Markets Authorityand the PRA will represent the UK at the European BankingAuthority. These new European Supervisory Authorities, whichhave greater powers than their predecessor organisations, willbe responsible for some direct supervision activities, theimplementation of the above reforms and the developmentof the EU single rule book.
As an operator of regulated markets and MTFs, a regulatedcentral counterparty and a central securities depository,the Group is a stable, trusted and neutral provider of thefull range of market infrastructure in a broad range of assetclasses. We will continue to respond to the dynamic marketenvironment in order to create value for both customersand shareholders, by providing commercial, reliable,transparent and fully compliant products and services.
The implementation date for the European Central BanksTarget 2 Securities (T2S) project, aimed at facilitating cheapercross border settlement across Europe, has now been setfor the end of 2014. The ECB announced in January 2011 thatMonte Titoli has been accepted in Phase 1 of this importantproject, a move that has been universally welcomed by theGroups customers and key regulators. Our involvement andsupport of this key initiative evidences our commitment toquickly embrace market changes and to ensure that ourcustomers receive maximum benet from them.
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10 Overview
London Stock Exchange Group plc Annual Report 2011
Chairmans statement
Market and operating environmentThe Group operates in an increasingly dynamic and fast pacedsector. In particular, the environment remains characterisedby widespread regulatory change and further exchangesector consolidation.
We are proponents of regulatory regimes that place greatvalue on efcient, transparent, independent and trustedcapital markets services. Currently, the EU is developing itsnew European Markets and Infrastructure Regulation (EMIR),
conducting a review of the Markets in Financial InstrumentsDirective (so-called MiFID II) and undertaking a largeinfrastructure project Target 2 Securities (T2S) in the posttrade landscape (see page 9 of this report for further details).
We are actively involved in these regulatory processes,providing responses to consultations, reviewing draft policyand seeking engagement with policy-makers. All of thisregulation will impact our business opportunities.
In the UK, the Government is currently consulting on a newapproach to nancial regulation. Again we are active in ourlobbying, focusing on themes of transparency, efciency,commerciality and the UKs attractiveness as a global nancialcentre. We have also been vocal on the need for London to have aneffective voice at an EU level. It is expected that the Governments
proposals will be implemented in mid-2011, with the aim ofintroducing a new regulatory framework by the end of 2012.
As domestic and international economies evolve, the Groupsequity and debt markets continue to provide an importantsource of nancing to business at home and overseas. Thisfunding function is essential for economic prosperity. The yearsaw strong overall growth in the number of new equity issues,up 68 per cent with a more than threefold increase in moneyraised by new issues. In particular, we were delighted to celebratethe 15th anniversary of AIM, our junior market, in 2010 and wehave been working closely with the Government and Europeanpolicy makers to nd ways of encouraging equity investment ingrowing businesses. AIM continues to play a pivotal role in thefunding of innovation and business success, in turn driving
economic growth, directly supporting 250,000 UK jobs. We arestaunch advocates of the importance of the SME sector and therole it plays in economic prosperity.
The actions that we have takento ensure our Company remainsefcient, competitive and ocusedon building increased scale,scope and reach, have put
us in a strong position.
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Overview Chairmans statement
Strategic DevelopmentWe aim to develop the Group further, with increasinginternational scale, together with extended reach and scopeto provide competitive services to global customers. Thisapproach underpins the rationale for our proposed mergerwith Canadas TMX Group, announced in February this year.We believe this transaction will create a leading diversiedinternational exchange group with exciting opportunitiesfor growth. The process of achieving necessary approvals isunderway and will include seeking approval from shareholders
of both companies.
Our focus has also been on driving efciency throughmanagement changes, cost reduction, client alignmentand new technology. The results are showing through inimproved operational and nancial performance, and theefforts in this area will continue.
The second pillar of our strategic approach, characterisedas leveraging our assets, is also delivering results. We haveannounced plans to launch pan-European equity derivativestrading in the rst quarter of the new nancial year. We havealso strengthened our equities trading offering, stabilisedour share of trading and have developed a number of newinformation and technology products.
The CEOs review and the update on strategy provide moredetail on our plans and progress.
Financial performanceIt has been a good year for the Group, set against the backdropof more stable though still highly competitive markets. We madereal strides in delivering on our stated strategy to deliver greaterefciencies and to grow existing Group operations.
Reecting the upturn in nancial performance, the Boardis proposing a 12.5 per cent increase in the nal dividend to18.0 pence per share, resulting in a dividend for the full yearof 26.8 pence per share, a 10 per cent rise. The nal dividendwill be paid to shareholders on the register on 29 July 2011.
Board of DirectorsWe have refreshed the Board with the appointmentsof Paul Heiden, Gay Huey Evans and Massimo Tononi asNon-Executive Directors, and the addition of Raffaele Jerusalmias an Executive Director. Angelo Tantazzi, Oscar Fanjul andNigel Stapleton stepped down during the year and we thankthem for their substantial contributions during their tenure.
Please see the Governance section of this report on pages38 to 63 for more details of the Board and our report on
Corporate Governance.
ConclusionLooking forward, we expect that regulatory changes,macroeconomic factors, competition and developmentsin the exchange sector will continue to exert considerableinuence on the way we operate and future opportunitiesfor the Group.
We are very much engaged with the processes that shape thesedevelopments. The actions that we have taken to ensure our Groupremains efcient, competitive and focused on building increasedscale, scope and reach have put us in a strong position. We lookforward to continuing to make progress and to further strengthenthe Group, as we enter a new phase in our global industry.
Chris Gibson-SmithChairman
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12 Overview
London Stock Exchange Group plc Annual Report 2011
Chief Executives Review
We are a business in transformation,operating in a highly dynamic andevolving global industry; developmentof growth opportunities, continueddelivery on cost reductions, enhancing
our competitiveness and improvingcustomer service will remain pivotal tofurther progress in the year ahead.
Introduction and overviewWe have made good progress over the last year, with improvednancial performance and signicant steps taken in deliveringon our ambition to be, by scale and offering, a world-leadingdiversied exchange group.
Against a background of more stable although highly competitivemarkets, we achieved total income of 675 million, a sevenper cent increase. Adjusted operating prot was 341 million,a 22 per cent increase, as we maintained focus on cost control.
Growth across a range of Group operations illustrates theincreasingly diversied nature of our business.
The past year saw the cautious return of optimism to theeconomy and global capital markets. London remains aworld-leading centre for companies seeking to raise capital,both domestically and internationally, and the Group retainsan enviable franchise in helping issuers access capital andgenerate liquidity in secondary markets. We saw strong growthin the number of new issues and the pipeline across geography,sector and markets remains encouraging.
Following the introduction of a number of key initiativesdesigned to bring the Group closer to its clients, our shareof order book trading in UK cash equities has been stableover the year. Our xed income markets, MTS and MOT,
performed well and the IDEM derivatives market in Italyalso delivered good growth.
Our Information Services and Technology Services divisionsmade good progress. The number of users of the Groups realtime data remained broadly unchanged over the year comparedwith a period of reduced demand last year. Our other referencedata, desktop products, and FTSE Indices businesses all deliveredgrowth over the twelve months. Contributing to growth in theTechnology segment were MillenniumIT and other specialisttechnology services, including network connections andco-location of clients servers in our data centres. Furtherdetails on business performance and new developments areprovided in the review of strategy below and also in theBusiness Review section of this report.
Strategy ReviewLast year we set out a clear strategy for the development ofthe business, with customer focus and improving operationalefciency very much central to our plans. Our strategy isbroadly characterised as getting in shape, leveraging ourassets and developing opportunities. The imperatives arefourfold, namely to drive efciency, build scale, increasescope and extend reach.
Our strategic outline is more than a one year plan but we areundoubtedly making good progress.
Getting in shape drive efficiencyThe focus of initial management attention, getting in shape,was on reducing costs; implementing low cost, high performance
technology; improving client relationships; and adjusting tariffs,particularly with regard to improving our competitive positionin cash equities trading.
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Overview Chief Executives review
Pleasingly, we reduced our adjusted organic operating cost baseby eight per cent, reecting previously implemented headcountreductions and other savings.
Last year we conducted a full review of our technologyrequirements, resulting in the acquisition of MillenniumIT,an innovative, capital markets-focused software servicesbusiness. We embarked on an ambitious programme to swiftlyimplement MillenniumITs leading, high speed and highperformance equities trading technology across the Groups
markets. In October, we successfully completed the migrationof Turquoise, our pan-European MTF, onto the MillenniumExchange trading system. This was followed by the London StockExchange main UK equity trading market in February 2011. Thenew platform is running at least 10 times faster than its predecessorTradElect and delivering consistent world-leading average latencyof below 125 microseconds, fully meeting our requirements fora low cost and highly competitive trading system.
We continued the process started last year with the roll out of theTMX Groups derivatives trading technology, SOLA, to our IDEMmarket, following the successful earlier launch on EDX. This hasprovided IDEM clients with a faster and improved trading system.
Work to enhance our equity markets offering has driven signicantimprovements. We have negotiated improved pricing for clearing
and settlement services by external providers, which reduce theoverall cost of trading on our UK market; and we introduced newtariffs last May intended to incentivise trading which was wellreceived. Our share of trading, in what remains a competitivemarketplace, was stable throughout the nancial year at anaverage 63.5 per cent, and in Italy the share of order book valuetraded was also steady at 84.0 per cent.
Leveraging assets increasing scope and reachTurquoise, our pan-European MTF joint venture with 12 banks,which became part of the Group shortly before the start of thenancial year has made good progress, with a signicantly reducedcost base and a growing share of trading. Of particular note wasthe increase in dark pool trading, regularly occupying the numberone or two position among MTFs for much of the past year. We
have also recently announced plans to launch a pan-Europeanderivatives business through the creation of Turquoise Derivativesin combination with the Groups existing derivatives market, EDX,and use the SOLA platform already adopted by EDX. FTSE 100Futures will begin trading on this platform in June 2011, withfurther products planned, subject to obtaining relevant tradinglicences in some instances.
Post Trade had a strong year with total income up 30 per cent,driven in part by clearing an increased number of Italianderivatives and xed income trades which also resulted inhigher margin held by the clearing operation. Active risk andtreasury management of the cash margin in turn contributed toincreased net treasury management income. The Europeanpost trade landscape remains poised for widespread structural
re-denition and we continue to pursue a number of opportunitiesthat are available to the Group. In Information Services,Proquote, a cornerstone of our important retail strategy, has
had a transformational year, having been completely restructured,partnering with FactSet and recording a signicant surge in retailtrading volumes. We have also extended the UnaVista serviceto provide a Swaps Portal and a Conrmation Portal to helpclients automate processes and reduce costs and risk. We haveintroduced optionality for clients with new reporting structuresfor real time data use, and introduced new post trade dataservices, providing data in new forms to increase client choiceof the information they receive.
In Technology Services, MillenniumIT has signed agreementsto supply technology to a number of third parties, extendingthe number of users of its innovative systems including theJohannesburg Stock Exchange which recently announced itsintention to use Millennium Exchange, and the MongolianStock Exchange which signed a strategic partnership withthe Group to restructure and develop the national exchangeof the worlds third fastest growing economy.
Developing opportunities building scale and extendinginternational operationsThe last quarter of our nancial year saw the Group announcea merger of equals with Canadian-based exchange business TMXGroup Inc., to create a leading diversied international exchangegroup. As we set out at the time of the announcement, the merger
will create a group highly diversied across asset classes andgeographies, a leading global listings franchise, with signicantefciencies for customers, increased scale and reach, a strongbalance sheet and considerable growth opportunities. Over thecoming months we will continue to work on achieving thecustomary shareholder and regulatory approvals with the aimof completing the transaction in the autumn of 2011.
OutlookWe have had a good year, reporting a strong nancialperformance. I am especially proud of the energised teamI am surrounded by. People remain at the core of all thatwe do; from those on our highly successful new internationalgraduate scheme to experienced market practitioners, we areactively working together to drive the business forward. There
are many opportunities, especially in post trade, derivativesand nancial technology and I am excited about the future.We are a business in transformation, operating in a highlydynamic and evolving global industry; development of growthopportunities, continued delivery on cost reductions, enhancingour competitiveness and improving customer service willremain pivotal to further progress in the year ahead.
Xavier RoletChief Executive
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London Stock Exchange Group plc Annual Report 2011
Strategy in action
We continue to work towards our vision to beone o the worlds largest exchange groups.
We are delivering this vision by executinga clear strategy:
Strategic imperatives Our strategy in action progress and plans announced to date
Getting in Shape
Drive Efciency
Price and technology competition
in our markets
Need to align with customers
for efcient services
cost reduction programme: as part of ongoing operationalmanagement to achieve headcount efciencies andtechnology savings our organic cost base reducedseven per cent
migration of EDX and IDEM derivative trading platformsto SOLA; and Turquoise and SETS to Millennium Exchange;further roll out of Millennium Exchange to all our equitymarkets planned
increased customer focus and new tariff structuresintroduced to incentivise greater volumes and increasecompetitiveness (particularly in UK cash equities) UK share of trading stabilised in year at 63.5 per cent
Leverage our assets and developing opportunities
Build Scale
Need to service global customers
Scale drives efciency
Better able to respond to
regulatory change
technology migration programmes achieving scaleon Millennium Exchange and SOLA trading platforms
successful development of dark and a pan-Europeanlit offering through Turquoise 34 per cent share ofpan-European MTF mid-point (dark) trading, thesecond largest MTF venue
proposed merger with TMX Group to increase Group scaleand extend the range and efciency of services to clients
Increase Scope
Increased diversication away from
core local markets
Ability to service customers in
multiple asset classes
Need to work closely with clients
to incentivise trading and developnew services
launch of the post trade MIC service and CCP serviceto the domestic MOT segment of Borsa Italianasxed income market
plans for Turquoise Derivatives well underway,combining with EDX; Trading of FTSE 100 Indexfutures to start June 2011
enhancement of co-location services to both tradingrms and solution providers located in the Exchangesdata centre
expansion of the UnaVista product suite to include
new Swaps Portal and Conrmation Portal Services
Extend Reach
Globalisation of capital markets
proposed merger with TMX Group to enhance and diversifythe range of Group products
strategic partnership with Mongolian Stock Exchangeto provide technology and assist in market development
a Letter of Intent with National Stock Exchange of Indiato evaluate joint strategic business opportunities
further global capital markets relationships establishedthrough MillenniumIT sales
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Total income
12
3
4
5
6
7
89
10
11
12
13
1415 16
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Business Review
We manage and report on the performanceof the Group in four principal segments:
Capital Markets Post Trade Services Information Services Technology Services
In addition, we provide sub-segmentalbreakdown of total income and activities,shown in the next column.
The following pages provide informationon developments over the past year.
The business is managed on a day to daybasis by an Executive Committee, comprising:
Xavier Rolet Chief Executive Ofcer
Doug Webb Chief Financial Ofcer
Raffaele Jerusalmi Director of CapitalMarkets and CEO of Borsa Italiana
See biographies on page 38.
Kevin MilneDirector of Post Trade Services
Joined the Group in 2010. Previously CEOof Xtrakter and senior manager at Euroclear.Has over 25 years of experience in nancialmarkets including Thomson Financial and Omgeo.
David LesterDirector of Information ServicesJoined the Group in 2001. Over 20 years experiencein nancial markets including Thomson Financial,Accenture and KPMG.
Antoine ShagouryChief Information OfcerJoined in 2010 from American Stock Exchange(now part of NYSE Euronext) where he was CIO.Previous experience includes Instinet Services
and Datastream Corporation.
Tony WeeresingheDirector of Global Development andCEO of MillenniumITJoined the Group in 2009. Prior to foundingMillenniumIT in 1996 he was Head of the OpenSystems Division of ComputerLand and CountryManager of Oracle in Sri Lanka.
The team meets regularly to review business andnancial performance, develop Group strategy, reviewproject development, set targets and agree actions.
Year ended 31 March 2011
Capital Markets m
1Annual fees 37.8
2Admission fees 33.0
3 Cash equities trading UK 86.4
4 Cash equities trading Italy 30.7
5 Derivatives trading 16.8
6 Fixed Income trading 32.4
7 Other Capital Markets 44.4
281.5
Post Trade Services
8 Clearing 35.9
9 Net treasury income through CCP business 51.3
10 Settlement 18.2
11 Custody & other 45.2
150.6
Information Services
12 Real time data 101.2
13 Other information 83.5
184.7
Technology Services
14 MillenniumIT 18.2
15 Technology 30.4
48.6
Other
16 Other revenues 9.5
674.9
Segmental review
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2007
2008
2009
2010
3,533
3,579
3,304
3,046
Number of companies
2007
2008
2009
2010
45
106
77
60
Money raisedbn
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IntroductionTheGrouphasasuccessfultrackrecordofdevelopingandpromotingmarketsandsegmentstomeetthespeciccapitalraisingneedsofissuers.Byprovidingaccesstoadeeppoolofcapitalandefcientsecondarymarkets,weprovideliquidityinissuerssecuritiesandgreatervisibilityamongstinvestors,resultinginalowercostofcapitalforcompanies.
Asoneoftheworldsmostinternationalmarketsforlistings,wehaveseenimprovementintheIPOmarketinthepastyear.
Therehavebeen185newissues,a68percentincreaseyearonyear,andwehavehelpedcompaniesraiseatotalof40billioninnewandfurtherequityissuance,andenabledcompaniesandsovereignstatestoraise454billionofdebt.
Inoursecondarymarkets,wehavecontinuedtoprovideaccesstohighlevelsofliquidityacrossourmarkets,introducedleading-edgetradingplatformsandadjustedtariffstoincentivisetrading.Volumeandvalueoftradingforequitiesremainedstableamidstperiodsofvolatilityinthemarkets.FixedIncometradingincreasedsignicantlyasEuropeanGovernmentsissuedarecordamountofbonds,andIDEMderivativesvolumesalsoincreased.
PrimaryMarketsThenumberofnewcompaniesjoiningtheGroupsmarketsincreasedby185duringtheyear(2010:110),bringingthetotalnumberofcompanieslistedoradmittedonourmarketsto2,938.IPOfundraisingrosebymorethan235percent,as99companies(2010:50IPOs)fromacrossthegloberaisedover13.1billion(2010:3.9billion)onourmarkets.Inaddition,27.2billion(2010:72.6billion)wasraisedinsecondaryissues.ThepipelineofIPOsremainsstrong,althoughmarketvolatilitymayaffectthetimingofsomeissues.
Capital Markets
The Groups Capital Markets divisionfacilitates companies raising ofcapital both equity and debt together with the provision of liquidsecondary markets for trading.RaffaeleJerusalmiDirectorofCapitalMarketsandChiefExecutiveOfcerofBorsaItaliana
Strategy: Become a more client-centric business
Promote and extend appeal o ourmarkets to international issuers
Product innovation beyond equities in particular in equity derivatives
and fxed income
Add value through integrated oeringrom listing to cash trading and indices
to derivatives trading
Improve the competitiveness andscale o our cash equities business
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2007
2008
2009
2010
242
290
256
252
Borsa Italiana average daily number of trades000s
2007
2008
2009
2010
6.5
6.9
4.6
9.0
LSE average daily value tradedbn
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BusinessReview CapitalMarkets
Wehavecontinuedextensivemarketingactivityacrosstheglobetocompaniesseekingcapital.AmongthenotablecompaniesjoiningourmarketswereEssarEnergy,InternationalConsolidatedAirlinesGroup,AZElectronicMaterials,EnelGreenPowerandTransContainer.Aswellasthefocusonkeygrowtheconomies,includingRussiaandLatinAmerica,wehavebeenspreadingourfootprintinfrontiermarketssuchasVietnam,IndonesiaandMongolia.InJanuary2011,weformedastrategicpartnershiptorestructureanddeveloptheMongolianStockExchange.InMarchHoangAnhGiaLaiJointStockCompanybecametherstVietnamesecompanylistedontheLondonStockExchange.
TheEuropeanSecuritiesandMarketsAuthority(ESMA)announcedaframeworkinMarch2011whicheasestheprocess
fornon-EUissuerstolistinEurope.Itenablesprospectusesfromnon-EUcountrieswhicharedrawnupincompliancewiththatthirdcountrylegislationtohaveawrapaddedcontainingsupplementarydisclosures.Israeliissuersbecamethersttobenetfromthisnewframework.
SecondaryMarketsEquitytradingOurcashequitiesmarketsaredesignedtomaximisetheliquidityofanindividualsecurityanddeliverefcienttradingpriceformationandexecutionservices,throughrobusttradingsystems,effectiveregulationandahighlevelofpriceandtradetransparency.
ThemostimportantperformancemetricsarevaluetradedintheLondonmarketandvolumetradedintheItalianmarket.Bothhaveremainedstableinthepastyear.InLondon,theaveragedailyvaluetradedwas4.7billion(2010:4.6billion);inItalytheaveragedailynumberoftradeswas257,000(2010:252,000)withvolumespickingupstronglyinQ4.
WetookanumberofstepsinthepastyeartoimprovethecompetitivenessofourcashequitiesmarketintheUK.Suchmeasuresincludedchangestotariffstoincentivisemoretrading,reductionsinposttradecostsbynegotiatingwiththirdpartyproviderstoreducetheirfees,andimprovingclientrelationships.Shareoftradingwasstableoverthecourseoftheyearat63.5percentoftotalUKlitorderbooktradingand84.0percentinItaly.
InFebruary2011,wemigratedourcashequitymarketstotheMillenniumExchangeplatform.Thisnewtechnologyhasmadetradingspeeds10timesfasteranddeliveredsubstantialperformanceimprovementstoclients.Itisnowprovidingthe
Groupwithalowercostbaseandamoreexibleplatform.Separately,thevaluetraded,volumeandnumberofETFsandETCsonourmarketshaveenjoyedstronggrowthoverthepastfewyears.Inaggregatetherewere1,345ETFslistedontheLondonStockExchangeandBorsaItalianaattheyearend,up56percentonthepreviousyear.OurmarketscomprisethelargestETFmarketinEuropeintermsofturnover(tradingvolume).Averagedailyvaluetradedfortheyearreached483million,deliveredthrougha31percentincreaseinaveragetradesadayto18,291.RetaildemandforETFtradingcontinuedtobestrong.
We are a leading global primarymarkets venue for internationalcompanies and the leading venuefor equities trading in Europe.We continue to build on our broad
portfolio of assets including xedincome and derivatives.
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InNovember2010,IDEMmarketsmigratedtotheSOLATradingplatform,atechnologydevelopedbyTMXGroup,increasingtherangeoffunctionalitiesavailableforIDEMmembers.EDXsuccessfullymigratedtotheSOLATradingplatformin2009.
Wehaveannouncedplansforthelaunchofapan-EuropeanderivativestradingservicethroughTurquoise,tocommenceinJune2011.TheservicewillprovidetradinginfuturesandoptionsonkeyindicesandsinglestocksacrossEuropeanmarkets.EDXistobeincorporatedintoTurquoiseDerivatives,
toprovideanefcientLondon-basedservice.
DerivativesIDEMistheGroupsItalianderivativesmarket,composedoftwosegments:IDEMEquities;andIDEXforelectricityfutures.TradingofInternationalOrderBookandNorwegianderivativesisconductedonEDXinLondon.
ItwasarecordyearfortradingonIDEMwithparticularlystrongperformanceintheseasonallybusyQ1period.Thetotalnumberofcontractstradedincreased13percentfromlastyear,reaching46.4million.TradingofItalianelectricityfuturesonIDEXreducedfourpercentatanaverageof59GWhtraded
eachday.ThenumberofcontractstradedonEDXdeclined37percentto35.6million,principallyreectingthelossofScandinavianderivativestradingonEDXattheendof2009.
AIM
Companiesfromaroundtheworld
Accesstoadeeppoolofcapital
ContributiontoUKEconomyin2009*
GrowingAIMItalia
*EconomicImpactofAIMandtheRoleofFiscalIncentivesbyGrantThornton,September2010
1,174companiesand82.0billionaggregatemarketcapitalisation.
459companieshavemajoroperationsoutsidetheUK.
Fromawiderangeof42businesssectors.
62NominatedAdvisers.
MakingtheequityfundingladderworkforUKSMEs:Overthepastfewyears,policymakershaveincreasinglyrecognisedthesignicantpotentialofSMEsasdriversofgrowth,stability,innovationandemployment.WehaveworkedhardattheUKandEuropeanlevelstomakesurethattheregulatoryandtaxenvironmenthelpssupportthesebusinessesthroughouttheirgrowth,fromseedcapitaltoAIMandbeyond.
InpartnershipwithAIMcompaniesandorganisationsrepresentingbothsmallbusinessandtheinvestmentcommunity,wehaveplayedanintegralroleindevelopingtheUKGovernmentsgrowth
agenda.Thisapproachhasbroughtstrongresults,includingimportantpolicymeasuresinthe2011Budgettosupportventurecapitalinvestment.InBrussels,weareworkingcloselywiththeEuropeanCommissionandParliamenttobuildthebestpossibleregulatoryenvironmentforSMEgrowthmarketstoencouragefundraisingwhilemaintaininghighlevelsofinvestorprotection.Morewidely,wecontinuetoactasathoughtleaderontheseissues,hostingorparticipatinginpublicdiscussionwithpolicymakersatthehighestlevels.
1.1billionraisedatadmissioninthepastyear.
6.6billionraisedthroughfurtherissuance.
Valuetraded37.8billionwith4.9milliontrades.
74.5billionraisedsincelaunchin1995.
12billiontoGDP.Supporting250,000
full-timeequivalentjobs.
LaunchedDecember2008.11companiesat31March2011.15NominatedAdvisers.AcquisitionofProMac
(Italianmarketforsmallercompanies)nineItalianSMEsadmitted.
AIM
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BusinessReview CapitalMarkets
Wearealsoexpandingourservicesandproductrange,includingindicesprovisionwhichnowcoverassetsundermanagementofalmost7bn.MTSCredit,apan-EuropeanMultilateralTradingFacility(MTF)willbelaunchedbeforetheendof2011.Itwilloffertradinginmorethan2,400investmentgrade,Euro-denominatedcorporate,nancialandcoveredbonds.
Therewasgoodtradingonourretailbondmarkets.BorsaItalianasMOTserviceattracted4.0milliontradesduringtheyear(2010:3.5million).IntheUKtheOrderbookforRetailBonds(ORB)increasedthenumberofcorporate,Government
andsupranationalbondsto147thatwereavailablefortradingbytheendoftheyear,upfrom73atlaunchinFebruary2010,with23participantsprovidingliquidity.
FixedIncomeMTSprovidesregulatedelectronictradingplatformsforintermediariestradingEuropeanwholesaleGovernmentbondsandothertypesofxedincomesecurities.TradingatthestartoftheyearwasaffectedbytheEurozonesovereigndebtcrisis.However,actionstakenbytheEuropeanCentralBankgavecondencetothemarketswhichhelpedrestorevolumes.Inparticular,averagedailyvolumeinFrance,theNetherlandsandSpainwentup92percent,72percentand17percentrespectively.
MTSnowcovers15marketplacesandcontinuestoexpanditsgeographicscope.WeaimtofacilitatenewmarketsandconsolidateexistingMTSmarkets.
Trading
ActiveretailmarketsinItaly DevelopingretailmarketsintheUK
Access Products CostreductionandMarketing
Retailoffering
LargestretailmarketinEurope,withmorethanonethirdoftotaltrades.
850,000activeprivateterminals.
Nearly4milliontradesand220billiontradedonMOT.
RationaleCapitalmarketsandcoreactivitiesareshowingstrongsignsofrecoveryandgrowth.WeareexportingtheMOTmodelfromItalytotheUKandpromotingourproductstoretailinvestors.
RetailinvestorscanaccessrealtimeItaliandataviaProquoteItaly,ournancialinformationandtradingsystem.
ProquoteMobileenablesaccessviaasmartphoneorothermobiledevice.
DMADirectMarketAccesstoprovideprivateinvestorswithalevel
playingeldwithmarketprofessionals.
ORBOrderBookforRetailBondstradingUKGiltsandCorporates.
ETFsandETCs.Coveredwarrants.
Lowcostaccesstorealtimedata.
Tradingfeepromotionforretailbrokers.
Objectivetoreduceposttradecosts.
Workingwithbrokers/datavendorstotailoreducationtoretailinvestors,includingroadshows.
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007
008
009
010
95
111
103
108
Contracts cleared
2007
2008
2009
2010
2.0
2.6
3.1
4.5
Initial margin heldAverage bn
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IntroductionOurPostTradeServicesdivisionprovidesclearing,settlementandcustodyservicesforequity,derivativeandxedincomesecuritiesonmultipleplatformsandforOTCproducts.
Thelast12monthshaveseenunprecedentedfocusontheareaofposttradefrommarketparticipants,industrycommentators,politiciansandpolicymakers.Thisfocusandresultantreformonagloballevelissettoprofoundlychangetheposttradelandscape.Wecontinuetobeattheforefrontofthisreform
toensurethatourmarketsandourcustomersenjoythesafest,mostrobustandcosteffectiveclearing,centralcounterparty,depositoryandassetservicingenvironments.
Wehavemadechangestothemanagementofourbusiness,inparticularwiththeappointmentofPaoloCittadiniasCEOofMonteTitoliaswellasremainingCEOofCC&G.Weareworkingtopromotetheintegrateddevelopmentoftheposttradebusinessesataninternationallevelhelpingtodrivethegrowthanddiversicationofourservices.
ClearingOurclearingservices,providedbyCC&G,guaranteetradesandmanagecounterpartyriskinarangeofassetsandinstrumentsincludingcashequities,derivatives,energyproductsandGovernmentandcorporatebonds.
Wehavedeliveredagoodperformance,with30percentgrowthintotalincome,drivenbyanincreaseincontractscleared,particularlyinIDEMderivativesandMTSxedincometrading.Thesetradescarryhigherinherentriskthanequitytrades,resultinginhighermarginfundsheldovertheyear.
Post Trade Services
Our Post Trade Services divisionprovides a range of risk managementand trade processing services toensure the successful completionof trades and custody of assets.KevinMilne
DirectorofPostTradeServices
Strategy:
Provide capital markets with the mostefcient post trade arrangements
Build the scale o our oeringthroughout the post trade process
Champion greater post tradeefciency and competition in Europe
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2007
2008
2009
2010
2.63
2.79
2.69
2.87
Assets under custody trillion
2007
2008
2009
2010
80.9
74.3
72.0
83.9
Settlement Instructions
m
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BusinessReview PostTradeServices
InitialmarginforCC&Gaveraged6.9billiondailyfortheperiod(2010:4.5billion).WemadesignicantinvestmentinourriskandtreasurymanagementfunctionsinCC&G,whichresultedinimprovedreturnsonthecashplacedondeposit.Thegrowthinmarginheldandimprovedrisktreasurymanagementcontributedtoanincreaseinnettreasur yincometo51.3million(2010:16.2million).
Newserviceswereaddedduringtheyear.InOctober2010CC&GintroducedaguaranteeservicefortheNewMIC,theinterbankcollateraliseddepositmarketinItaly,managedbye-MID.TheNewMICwaslaunchedasasuccessortotheoriginalMICproject,whichoperatedwithBancadItaliaasitsguarantor,createdtostimulatetheItalianmarketafter
thenancialcrisisin2008.
InNovember,CC&GextendedtheCCPserviceonMOTandintroducedcorporatebondsasanassetclassserved.Bytheendoftheyear,CC&Gcoveredsevenassetclassesand10markets.EuroTLXwilllaterthisyearusetheCC&GCCPserviceforItalianGovernmentandcorporatebonds.
Bytheyearend,CC&Ghad171members,up22percentfromlastyear,from10countriesaroundEurope.73memberswerefromoutsideItaly,accountingfor68percentofvolumesinderivativesand54percentinequities.
Ournettingservicesprovidescalebenetstocustomersintwoways:asingleriskpositionpermemberattheendofeachday;andasinglesettlementinstructionpersecurityforeachrm.Therstisimportantforclientscapitalmanagement,thesecondfortheirposttradecostspertransaction.Forinstance,wechargeasinglefeeforclearingatrade,includingnettingandsettlement,leadingtolowerposttradecostsforourlargecustomersinItaly.Clearingmemberscanalsobenetfrommarginoffsetbetweendifferentproductstradedondifferentvenues.
IntheUK,wecontinuedtoworkwithclearinghouses,suchasLCH.Clearnet,toreduceclearingtariffsandoverallcostoftradingforourclients.CC&GwillalsoprovideservicestoTurquoiseDerivatives.
SettlementMonteTitoliisourSettlementCompanyandCentralSecuritiesDepository(CSD),withawiderangeofconnectionstoEuropeanmarketsandcentralcounterparties.
Inthepastyear,weprocessedaround70millionsettlementinstructions,adecreaseof17percentonthepreviousyearduetoincreasednettingefciencyinourCCPandlowerOTCactivity.MonteTitolihasahighlyefcientsettlementrateat99.5percentwhilstmaintaininglowcostsforclients.
Wecontinuetoprovideoptionsfortraderoutingtoclients.Ourmulti-purposeroutingengineX-TRMisabletoroutetradestonumerousclearinghousesandsettlemententitiesincludingCC&G,LCH.ClearnetSA,EuroclearBankandClearstreamBankingLuxembourg.WehavestartedtoprovideroutingservicestocashequitytradingonSETS.
CustodyMonteTitoliisoneofthelargestCSDsinEuropeandprovidesassetservicingforawiderangeofnancialinstruments,encompassingGovernmentsecurities,corporatebonds(includingassetbackedsecurities),shares,coveredwarrantsandmutualinvestmentfunds(closed-endfunds,propertyfundsandexchange-tradedfunds).Bytheyearend,assetsundercustodyhadreached3.0trillion,anincreaseofvepercent,partlydrivenbyan
increaseinforeignsecuritiesheld.Assetsheldweremadeupof19percentequities,48percentGovernmentbonds,and33percentcorporatebonds.
Inthecomingyear,weaimtoenhanceourassetservicesbyofferingacashmanagementandsecuritieslendingservice.
InApril,theGroupagreedthedisposalofServizioTitoli,aproviderofshareholdermanagementservicestolistedcompaniesinItaly.RevenueforServizioTitolilastyearwas7.9million.
Clearing, settlement and assetservicing volumes have increaseddue to recovery and growth intrading volumes on our markets.
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IntroductionTheInformationServicesbusinessdeliversrealtimedataandotherInformationproducts(includingreferencedata,indicesanddesktopsolutions),ensuringefcientpricediscoveryandextensivemarketintelligencefortradingparticipantsandinvestors.
Reliableandcomprehensivemarketinformationenablesbusinessestomakesounddecisionsinafast-changingworld.Inthepastyear,wecontinuedtoimproveourinformationofferingtoabroadbaseofinternationalclients.
RealTimeDataTheGroupsRealTimeDatabusinessisaprimaryreferencepointforUKandItaliancashequitiesandotherinstruments,usedbytradingparticipantsandinvestorsatalllevels.
Thenumberofprofessionalusersaccessingrealtimedata,viaourdirectnetworkandalsoviaover200networkserviceprovidersandmarketdatavendorpartners,remainedstableat93,000(2010:93,000)forLondonStockExchangeand139,000(2010:142,000)forBorsaItaliana.Reectingtheevolutioninthewaythatrealtimedataisdistributed,duringtheyearweintroducednewpricingandserviceinitiativesfordirectreportingandnon-displayandotherapplicationusage,updatingforevolveddatausageandreducingcostsforanumberofourclients.
InJuly2010,welaunchedanewposttrademarketdataservicetoprofessionalusers,offeringrealtimeposttrademarketdatafromboththeLondonStockExchangeandBorsaItalianacashmarkets.Theofferinghasbeendesignedtodeveloptheavailabilityofhigh-qualityposttrademarketdatainthemulti-venueMiFIDenvironment,toimprovetransparencyofEuropeantradingdata.Wewerepleasedtoseethatotherexchangeshavefollowedourleadbyprovidingsimilarservices.
OtherInformationWeprovidereferencedataandsoftwaresolutions,helpingclientswitheffectivedatamanagementandstraightthroughprocessing(STP).Inthepastyear,wefurtherdevelopedourservicestoprovideclientswithenhancedsecureandefcientdatamanagementandconnectivitythroughUnaVistaandSEDOL.
UnaVistaistheGroupssecure,hostedplatformforallmatching,validationandreconciliationneeds.UnaVistaoffersarangeofbusinesssolutionswithinthreeareas:PostTradeServices,DataSolutionsandReconciliations(seecasestudyonpage25).OurPostTradetransactionreportingserviceenablescustomerstosendinformationtomultipleregulators,includingtheFSA(UK)andAFM(Netherlands).ThenewlylaunchedPostTradeConrmationPortalandSwapsPortalfurtherstreamlinetheposttradeprocessandreduceriskexposureforourcustomers.
SEDOLisourglobalmulti-assetclassreferencedataservice,providinguniqueidenticationcodesforglobalsecurities.SEDOLcodesareauniquecountrylevelidentierandincludebothlistedandunlistedinstrumentscoveringallassetclasses.TheSEDOLMasterleService(SMF)databaseprovidesclientswithaccess
toqueryreferencedataonover19millioninstruments,upfrom10millionlastyear,sourcedfromover80countriesworldwide.SMFiscurrentlybeingupgradedonUnaVistaDataSolutionstoallowimprovedcustomerinteractionwiththedataaswellastheincorporationofnewdatasets.
Information Services
The Groups Information Servicesdivision provides a diverse rangeof data and tools that enabledecision making and operationalefciencies of our extensive,international client base.DavidLesterDirectorofInformationServices
Strategy:
Deliver inormation services thatimprove the efciency o our industry
Leverage our exible platorm toexpand scale and scope o productoering across the Group
Tailor our oering to meetcustomers needs
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2007
2008
2009
2010
96
112
104
93
LSE professional terminals000s
2007
2008
2009
2010
160
151
142
147
Borsa Italiana professional terminals000s
Governance
Groupfinancialstatements
Otherinformation
BusinessReview
Overview
23
Forfurtherinformationvisit:www.londonstockexchangegroup.com
BusinessReview InformationServices
Inadditiontoreferencedataservices,ourdesktopsolutionsprovidefront-endproductsformarketdataaswellasorderandexecutionmanagementsystems,allprovidedthroughProquote,inItalyandtheUK.
Proquoteprovidesnancialservicesrms,listedcompaniesandretailinvestorswithefcientaccesstoastoreofnancialinformationincludingmarketquotes,newsandsecurityproles.InItaly,wereached35,000screensbytheyearend,up1,000onthepreviousyear.IntheUK,thenumberofdesktopuserstaking
realtimedatafromProquotewas4,800.InconnectingbrokerswithRetailServiceProviders(RSPs),Proquoteenjoysaleadingpositionwithanetworkof36RSPs;withorderowviatheRSPnetworkforthefourthquarterincreasingby46percentonthesameperiodfortheprioryeartoover400,000tradesamonth.
RNSisaleadingserviceforrealtimeUKregulatorynewsannouncements.Issuers,includingasignicantproportionofFTSE100companies,chooseRNStomeettheirdisclosureobligationsandcommunicatewithprofessionalinvestorswithatotalof180,000announcementsoverthepastyear.
FTSE,ourjointventurewithTheFinancialTimesLtd,providesnancialindicestointernationalclients.Sinceitsestablishmentin1995,ithassuccessfullydevelopedtheFTSEbrandgloballyandtodaythemajorityofitsrevenuesaregeneratedoutsidethe
UK.Withover$5trillionofassetsestimatedtobebenchmarkedtoFTSEIndicesglobally,itisthethirdlargestindexprovider
TurquoiseDerivatives
IOBEquityDerivativesonRussian,Kazakhstan,Egyptian,SouthKoreanandIndianunderlyings.
FTSERussiaIOBindex.Norwegianstockandindex
optionsandfutures.NewlylaunchedIOB(Russian)
DRDividendFutures.
TurquoiseDerivativesemergingmarketsbookanequityderivativesmarketfocusedonemergingmarketscompaniestradedontheLSEsIOBorderbook.
TurquoiseDerivativeslaunchedMay2011withFTSE100IndexfuturestocommencetradinginJune
2011(subjecttoobtainingrelevantlicences).
SOLATrading,TMXGroupsmarket-leadingultra-low-latencyderivativestradingtechnology.
AlsousedbytheGroupsIDEMderivativesmarket.
CC&Gprovidesriskmanagement,margincalculation,nettingandsettlementprocesses.
ClearinghandledbyLCH.Clearnet.
Existingproducts
(TransferredfromEDX)
Newproducts Technology Clearing
worldwideandservicestheworldslargestassetowners,fundmanagersandinvestmentbanks.FTSErevenuesincreased18percentduringtheyear.
DuringtheyearFTSEacquiredtheoutstandingsharesofFTSE/XinhuaIndex,nowrenamedFTSEChinaIndexseries,whichistheleadingindexseriesdesignedtoenableinternationalinvestmentintheChinamarket.
Turquoise,ourmajorityownedMTFofferingtradinginpan-Europeanequitiesonarangeofmarkets,hassuccessfullygrownitsshareoftrading.Asattheendoftheyear,TurquoisewasthethirdlargestMultilateralTradingFacilityforlitbooktradingwitha3.6percentshareofpan-EuropeansecondarytradingandthesecondlargestMTFmid-point,ordark,marketwitha34percentshareofpan-EuropeanMTFmid-pointtrading.
ThisyearTurquoisesuccessfullycompletedthemigrationofitstradingplatformtotheMillenniumExchangeplatform.Thenewplatformhasincreasedthespeed,capacity,functionalityandscalabilityoftradingandprovidedenhancedaccessforcustomers.
From1April2011,TurquoisewillbereportedaspartofCapitalMarketsfollowingchangestothewaythebusinessismanagedontheincorporationofEDXintoTurquoiseDerivatives.
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6.05.0
3.73.0
1.41
11.0
0 .1 13 0. 101Tradingsysteml
atency(milliseconds)
T
radElect(Jun07)
T
radElect
R
elease2(Oct07)
T
radElect
R
elease3(Sep08)
T
radElect
R
elease4(May09)
T
radElect
R
elease4.1(Jul09)
T
radElect(Mar10)
M
illenniumExchange
LSEequity
M
illenniumExchange
Turquoise
Latencymilliseconds
24 BusinessReview
LondonStockExchangeGroupplc AnnualReport2011
Technology Services
IntroductionTechnologyServicescomprisestechnologyconnectionsanddatacentreservicesforclientsofLondonStockExchangeandBorsaItaliana,andtheMillenniumITsoftwarebusiness,basedinSriLanka,whichprovidestechnologyfortheGroupaswellastechnologyandenterpriseservicessalestothirdpartiesworldwide.
InOctober2010,wecommencedtherolloutofthenewMillenniumExchangetradingplatformtoourmarkets,
acriticalsteptoincreasingcompetitiveness.Thisnotonlyenablesustobecomethefastesttradingsystemintheworld,butalsogivesusalowercostbaseandmoreexibleplatform.
MillenniumITInthepastyear,wemigratedTurquoiseandtheUKcashequitiesmarketsontotheMillenniumExchangetradingplatform,ahighlyscalable,multi-assetclasstradingplatform,offeringtheGroupsclientssuperiortechnicalperformance,ultralow-latencyandenhancedfunctionality.
TurquoisemigratedtoMillenniumExchangeinOctober2010,deliveringaverageorderentrylatencyoflessthan110microseconds.Additionalfunctionalitywasdesignedtofurtherdifferentiatethemidpoint(dark)bookthroughimprovingthequalityofmidpointmatching.TheUKcashequitymarketsuccessfullymigratedinFebruary2011,withaveragelatencynowbelow125microseconds,morethan10timesfasterthanthepreviousTradElectplatform.Althoughtherewereafewinitialissuesgiventhescaleandspeedoftheproject,feedbackfromclientsonperformancehasbeenverypositive.
NextonouragendaisthemigrationofMTA,ourItaliancashmarket,andtheMOTxedincomemarket.MillenniumITisalsodevelopingaNewClearplatformforourposttradeservices.
Our Groups Technology Servicesdivision optimises speed, performance,security and exibility of trading, andalso sells systems to third parties.TonyWeeresinghe(left)DirectorofGlobalDevelopmentandCEOofMillenniumIT
AntoineShagouryChiefInformationOfcer
Strategy:
Deploy low cost, high performanceand reliable platforms and software
across the Group
Provide specialist capital marketstechnology products to thirdparties worldwide
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Governance
Groupfinancialstatements
Otherinformation
BusinessReview
Overview
25
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BusinessReview TechnologyServices
Duringtheyear,MillenniumITwoncontractstosupplymarketsurveillancesystemstotheEgyptianExchangeandtradingsystemstoTullettPrebon,tofurtherdeveloptheirelectronicbrokingcapabilities.Africaslargestexchange,JohannesburgStockExchangewillalsoswitchtradingplatformsontoMillenniumExchange.LondonStockExchangeGroupandtheMongolianStatePropertyCommitteehavesignedanexclusiveStrategicPartnershipAgreementtorestructureanddeveloptheMongolianStockExchange,whichincludesMillenniumITprovidingtrading,posttradeandsurveillanceinfrastructure.
OtherTechnologyServicesTheGroupoffersasuiteoftechnologyservicesforclientaccessandconnectivitytoavarietyoftradingandrealtimemarketdataservices.
Wehaveseengoodtakeupofourco-locationservice,ExchangeHosting,whichoffersultralowlatencysensitivetradingclientstheabilitytotakespaceinourdatacentre,signicantlyreducingnetworklatencyandprovidinghighperformancetradingaccess.
Wehavedeepenedthescopeofourofferingthisyear,includinganeworderroutingserviceviaanultrafastbre-opticnetwork,allowinghostingclientstorouteorderstoallmajorEuropeanandUSexecutionvenues,directfromourdatacentre.Colt,thetelecomsservicescompany,issoontoprovideaproximityhostingservice,wheretraderscanplacetheirserversinColtsdatacentrewhichisincloseproximityto,andconnectedviabre-opticcableto,ourowndatacentre.
Wealsoopenedourmarkettonon-tradingmarketparticipants,includingvendorsandserviceproviders,whocantaketheirowncabinetswithinthehostingfacility,pavingthewayforthecreationofauniquecommunityofbothtradingrmsandsolutionprovidersinourdatacentre.
Wehavecontinuedtoexpandthescaleofournetworkoffering.Weintroduced1Gband10GbnetworkconnectivitytoourmarketstoprovideclientswithfasteraccesstoGroupdata.
TransactionReporting
ConfirmationPortal
SwapsPortal
Providingadditional
validationaboveandbeyondwhatismandatedbynancialregulators.
Conrmingtrades.Firmscancommunicatesettlementdataforvericationandmatching,reducingtheriskofsettlementfailure.
PartiescankeeptrackofCFDtransactionsandcommunicatethroughUnaVista.
Asuiteofreferenceand
historicaldataproductsdesignedtohelprmscreateagoldencopyofdata.
Functionalitiesincluding
matchingandworkowcapabilitiesmeetdifferentneedsofreconciliation.
DataSolutions Reconciliations
Asatrusted,neutralandregulatedcompany,theLondonStockExchangeisuniquelypositionedtoprovidesolutionsthataddressindustry-widechallenges.UnaVistaisonesuchcriticalcommitmenttotheindustryweserve.Itisatechnologicallyadvanced,hostedplatformwhichoffersourclientsarangeofbusinesssolutionsincludingpost-tradeservices,datasolutionsandreconciliations,andisdesignedtohelpourclientsbusinessesbecomemoreefcientandmoreprotablewhilstreducingtheirriskexposure.
UnaVista
PostTradeServices
Maintaining leading edgetechnology capabilitiescontinues to be a core focus.Technology not only enablesus to become the fastestmarket in the world, but givesus the ability to adapt and
bring efciency to markets.
OtherServices
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628.3 11.6616.7
37.1
21.1 674.9
575
600
625
650
675
700
2010 FXimpact
2010constant
currency*
Acquisitionsin prior year
Organic 2011
Total Income m Increase Decrease
26 BusinessReview
LondonStockExchangeGroupplc AnnualReport2011
Financial review
Yearended31March
2011 2010 Variance
Varianceat
constant
currency
m m % %
Revenue
CapitalMarkets 281.5 295.3 (5) (3)
PostTradeServices 99.3 100.0 (1) 3
InformationServices 184.7 169.3 9 10
TechnologyServices 48.6 39.4 23 24
Other 1.8 1.6 13 20
Totalrevenue 615.9 605.6 2 4
NettreasuryincomethroughCCPbusiness 51.3 16.2 217 229
Otherincome 7.7 6.5 18 18
TotalIncome 674.9 628.3 7 9
Operatingprotbeforeamortisationofpurchasedintangiblesandnon-recurringitems 341.1 280.3 22 24
Operatingprot 283.0 182.3 55 58
Adjustedbasicearnings
pershare 73.7p60.1p 23
Basicearningspershare 56.4p 33.8p 67
Segmentalreportinghasbeenrestatedtoreectthemanagementorganisationandreportingofthebusinesslinesduringtheyear.TechnologyServicescombinesITServicesandMillenniumIT,reectingthesimilarnatureoftheirproductsandservices.
AsnotedintheBusinessReviewInformationServicessectionofthisAnnualReport,Turquoisewillbereportedas
partofCapitalMarketsfrom1April2011,followingchangestothewaythebusinessismanagedonthemergerofEDXintoTurquoisetoformTurquoiseDerivatives.
The combination o good organicgrowth, successul acquisitionsand continued improvements inoperational efciency resultedin a strong fnancial perormancein the year, with 23 per cent growthin adjusted earnings per share.DougWebbChiefFinancialOfcer
Highlights:
Good growth in Total Income, up seven per centat 674.9 million (2010: 628.3 million); organicgrowth at constant currency was six per cent
Operating expenses before amortisation ofpurchased intangibles and non-recurringitems reduced organically, at constantcurrency, by eight per cent
Adjusted operating prot (before amortisationof purchased intangibles and non-recurringitems) increased 22 per cent to 341.1 million(2010: 280.3 million)
Operating prot rose 55 per cent to283.0 million (2010: 182.3 million)
Adjusted basic earnings per share increased23 per cent to 73.7 pence (2010: 60.1 pence).Basic earnings per share up 67 per cent to56.4 pence (2010: 33.8 pence)
Cash generated from operationsincreased 27 per cent to 381.8 million
(2010: 301.2 million)*Comprises2010TotalIncomerestatedto2011foreignexchangerates
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Governance
Groupfinancialstatements
Otherinformation
BusinessReview
Overview
27
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BusinessReview Financialreview
Thexedincomebusinessperformedstrongly,withvaluetradedinMTSup51percentto68trillionfortheyear.TradingvolumeontheMOTretailbondmarketincreased14percent.
Othercapitalmarketsrevenuesprimarilycomprisefeesformembershipofourmarketsandothernon-tradingrevenues.
PostTradeServices
Yearended31March
2011 2010 Variance
Varianceatconstant
currency
Revenue m m % %
Clearing 35.9 33.4 7 12
Settlement 18.2 21.1 (14) (10)
CustodyandOther 45.2 45.5 (1) 3
Totalrevenue 99.3 100.0 (1) 3
NettreasuryincomethroughCCPbusiness 51.3 16.2 217 229
Totalincome 150.6 116.2 30 35
Equityandderivativesvolumesclearedrosefourand13percentrespectively,contributingtotheincreaseinclearingrevenues.NettreasuryincomethroughtheCentralCounterparty(CCP)businessgrewsignicantlydueto:
53percenthigheraverageinitialmarginheld,mainlydrivenbyincreasedxedincomevolumesthroughtheCCPasaresultofbothhighertradingvolumesandadditionalxedincomemarketsguaranteedbytheCCP;and
signicantinvestmentinourriskandtreasurymanagementfunctionsenablingustoimprovetheratesachievedoninvestmentofmarginfundswithItalianbanks.
TotalIncomefromtheclearingbusinessrose76percentto87.2million.
Thenumberofpre-settlementandsettlementcontractsfell10and22percentrespectivelyfollowingareductioninOTCvolumesandincreasednettingdrivenbyariseinthenumberofmarkets
(suchasMOT)guaranteedbytheCCP.IntheCustodybusiness,thevalueofassetsundermanagementincreasedvepercentto3.0trillion.RevenuesfromServizioTitoliS.p.A.,theshareholderservicesbusiness,declinedslightlyto7.9million.On10May2011,thesaleofServizioTitoliS.p.A.toComputershareplcwascompletedforaconsiderationof32.4million.
CapitalMarkets
Yearended31March
2011 2010 Variance
Varianceat
constant
currency
Revenue m m % %
PrimaryMarkets
Annualfees 37.8 35.2 7 9
Admissionfees 33.0 34.0 (3) (2)
70.8 69.2 2 3
SecondaryMarkets
Cashequities:UK 86.4 101.8 (15) (15)
Cashequities:Italy 30.7 31.7 (3) 1
Derivatives 16.8 19.5 (14) (12)
Fixedincome 32.4 29.3 11 15
166.3 182.3 (9) (7)
Other 44.4 43.8 1 5
Totalrevenue 281.5 295.3 (5) (3)
Annualfeeincomeincreasedsevenpercent,withmarketcapitalisationattheendofNovember2009(whichformedthebasisofUKMainMarketfeesfortheyearended31March2011)up27per
centcomparedwiththeprioryear.Thiswaspartlyoffsetbya14percentreductionversustheprioryearinAIMcompanynumbersasatApril2010(whichformedthebasisofAIMfeesfortheyearended31March2011).InItaly,averagemarketcapitalisationfortheyearended31December2010wasvepercenthigherthanthecorrespondingprioryear(feesaresetonacalendarhalf-yearlybasisbasedonaveragemarketcapitalisationforthepriorsixmonths),whilstcompanynumberswerebroadlystableat296.
Admissionstoourprimarymarketsincreasedduringtheyear,withnewissuesgrowing68percentto185,including50internationalcompanies,andamorethandoublingofnewcompaniesjoining
AIM.Inrevenueterms,theseincreaseswereoffsetbyareductioninfurtherissues,whichlastyearbenetedfromthehighlevelofsecondaryfundraisingascompaniesrepairedtheirbalancesheets
followingthecreditcrisis;moneyraisedfromfurtherissuesdeclined63percentto27.2billionintheyear.
UKequitytradingrevenuesbenetedfromatwopercentincreaseinaveragedailyvaluetradedto4.7billion,whilstouraverageshareofvaluetradedfortheyearwas63.5percentupfrom61.4
percentforthemonthofApril2010.PricingchangesinSeptember2009andthepricingpilotinitiatedinMay2010resultedina17percentreductioninaverageyieldontheSETSorderbookto0.71basispointsanda15percentreductioninrevenue.
Italianequitytradingrevenuesarechargedonthebasisofthevolumeoftradescompleted,whichwasuptwopercentonlastyearatanaverage257,000perday.
DerivativetradingvolumesinIDEMincreased13percentversus2010,partlyoffsettingtheverysharpreductionintradingof
ScandinavianderivativesonEDXfollowingitschangeintradingplatforminDecember2009.RevenuesforQ4wereupvepercentonlastyear.
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349.6 5.8 343.8 19.85.5 24.8 32.2 336.9
250
290
270
310
330
350
370
2010 FX
impact
2010
constant
currency*
One-off
TradElect
write
down
Estimated
inflation
Organic Acquisi-
tions
in prior
year
2011
28 BusinessReview
LondonStockExchangeGroupplc AnnualReport2011
InformationServices
Yearended31March
2011 2010 Variance
Varianceat
constant
currency
Revenue m m % %
Realtimedata 101.2 103.7 (2) (1)
Otherinformationservices
83.5 65.6 27 28
Totalrevenue 184.7 169.3 9 10
ProfessionalterminalnumbersreceivingtheGroupsUKrealtimedataat31March2011werelittlechangedovertheyearat93,000.ProfessionalterminalnumberstakingItaliandataweretwopercentlowerat139,000,resultinginasmallconstantcurrencyreductioninrevenue.
Nonrealtimedataproductscontinuedtoperformwell,withgoodresultsacrossanumberofproducts.Inparticular,continuedgrowingcontributionsweregeneratedbySEDOL(whichprovidesuniqueidenticationforarangeofglobaltradablesecurities),UnaVista(aposttradedatamatchingservice),royaltiesfromtheFTSEindicesjointventureandProquote.TheInformationServicesdivisionalsobeneted
fromafullyearrevenuecontributionof10.0million(2010:0.3million)fromTurquoise,whichwasacquiredinFebruary2010.Turquoiserevenuesareshowngrossof5.8millionofmakerrebates,whichareincludedwithincostsofsales.
TechnologyServices
Yearended31March
2011 2010 Variance
Varianceat
constant
currency
Revenue m m % %
MillenniumIT 18.2 6.7 172 168
Technology 30.4 32.7 (7) (6)
Totalrevenue 48.6 39.4 23 24
TheGroupsTechnologyServicesdivisionreectedafullyearofrevenuesfromMillenniumIT,acquiredinOctober2009.
MillenniumIThasperformedwell,withtheprincipalfocusofactivityondevelopingtechnologyfortheGroup.Intheyearithasalsotakenanumberofthirdpartycustomerslive,includingacommodityexchangeinIndiaandsmartorderroutingtechnologyinCanada,andhasbeenawardedcontractsincludingTullettPrebon,theChittagongStockExchangeandalargeIndianbank.MillenniumITwillalsobeakeypartoftheagreementtorestructureanddeveloptheMongolianStockExchange,withwhomacontractwassignedshortlyaftertheyearend.
TheTechnologyServicesdivisionbenetedfromexpansionofourUKserverco-locationoffering,whichwaslaunched
lastyear,andgrowthinourItalianASPbusiness,duetotheconsolidationofservicesprovidedtoclientsandproductdiversicationtoattractnewcustomers.Thetransferofsupplyofourexternalcommunicationsnetworktoathirdpartyfrom
Ouroperatingexpenses,beforeamortisationofpurchasedintangiblesandnon-recurringitems,werereducedorganicallybyeightpercent,onaconstantcurrencybasis.Thisreects
previouslyannouncedheadcountandpropertyrestructuri