LSE poised for more growth opportunities in derivatives market

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The London Stock Exchange’s drive to become a bigger contender in the derivatives market helped to boost its profits by nearly a third last year, it was revealed yesterday.

The company said it was poised to seize more growth opportunities in the evolving market.

The exchange said yesterday its profit in the year to March rose 30 per cent to £442m ($699m), on a 10 per cent rise in revenue to £680m.

The performance was driven by the LSE’s inclusion of the FTSE International business acquired late last year.

It was also boosted by revenue growth in its Italian clearing house, which was up 147 per cent from deposits to Italian banks.

“Our full ownership of FTSE and our shareholder approved transaction with LCH.Clearnet will continue to transform our organisation,” said Chris Gibson-Smith, chairman of the LSE.

The exchange paid publisher Pearson £450m in December last year for the half of FTSE it didn’t own, a move that gave the LSE full ownership of the index provider and positions it to move aggressively into derivatives trading and clearing.

FTSE added £33m to the London Stock Exchange’s full-year revenue while the exchange also benefited from strong growth in revenue from its Italian clearing house which offers deposits to customers.

The LSE’s CC&G clearing unit contributed £127m to group earnings, an increase of 147 per cent from £51.3m the previous year.

“These results are broadly in line with expectations, with earnings boosted by net interest income from the LSE’s Italian clearing house and the inclusion of the FTSE business,” said Richard Perrott, an analyst at Berenberg Bank.

The LSE and its major rivals, such as Deutsche Boerse, NYSE Euronext and the Chicago Mercantile Exchange, are keen to move into derivatives clearing to tap regulatory reforms to force these complex asset types to use exchanges.

Xavier Rolet, who became LSE chief executive three years ago, is working on an ambitious plan to diversify the LSE by moving beyond its core share trading business, into data, technology and clearing.

“We have made great progress this year,” Mr Rolet said in a statement yesterday. “We will continue to innovate across our markets, products and services and we expect to make further good strategic progress.”

Last month, Mr Rolet secured the backing of shareholders to buy 60 per cent of European clearing house LCH.Clearnet, valuing the company at 813 million euros ($1.1bn).