We meet in a building with perhaps the cleanest, most freshly-vacuumed
carpets muddy snow might ever have been ground into. A PR fusses over our
yet-to-arrive subject’s alleged dislike of photoshoots and we are relegated from
shooting him against a snowy Paternoster Square to a grey office lobby with an
art installation depicting market movements with a bunch of plastic balls
suspended on strings. (Even though it’s not hooked up to anything, most of the
balls languish at the bottom.) London Stock Exchange Group’s Doug Webb appears
from nowhere, unbuttons his jacket and casually asks where we want him.
This is Webb’s first interview since joining LSE as CFO last June. “I like to
keep a low profile,” he says, grinning for the camera like a professional.
Perhaps he is aware of the siege mentality that put a few crow’s feet on the
LSE’s face in recent years. Few expected to see the 300-year old icon of
London’s global financial supremacy fighting off takeover bids from players with
none of its cachet and then merging with a continental (and comparatively less
international) player in Borsa Italiana. Now Webb wants to refresh the exchange.
“We need slightly different skills and a different view,” he says.
This is the new financial face of one of London’s – the UK’s, the world’s
most distinguished brands. On the day we meet, it seems fortuitous the ex-CFO of
defence and security giant Qinetiq, an FCA with a clutch of divisional and group
FD roles under his belt in Europe and North America, is bedding into the LSE
just as it looks for its next chief executive. Named as one of the possible
successors to Dame Clara Furse, Webb insists he is still too immersed in getting
to grips with the complexities of the exchange business to consider it. “I’m
just focused on the job I’ve been brought in to do.
“I’m still going through the learning process it’s much more complicated
than it seems on the surface and I’m still very much at the beginning of that,
so there’s plenty to keep me occupied now without having any thoughts on the
longer term,” he says. At any rate, ten days after we met the exchange announced
it had finally hired Furse 2.0 in Xavier Rolet, ex-CEO of Lehman’s France and
the man who led the LSE’s strategic advisory group after its demutualisation in
If Webb sought a challenge, he chose the right time to join the exchange. The
LSE stands accused by many of failing to keep up with growing competition,
especially with the advent of the 2007 Markets in Financial Instruments
Directive (MiFID) aimed at pan-European market liberalisation. Some say that
despite being the world’s most important and well-known brand in its space, its
technological and liquidity offerings just aren’t up to the job of 21st century
equities trading. Last month, the Financial Times said it was
“increasingly out of sync with the technology-savvy, cut-throat world of trading
It was these challenges that attracted Webb away from his role at Qinetiq when,
he says, he had no intention of going anywhere. “I wasn’t looking to change jobs
and I had been turning everyone else who approached me with offers away until
that point, because there was still plenty to do there,” he reveals. But the LSE
is a special sort of institution. It has this tremendous brand, so you have a
real asset to work with and this great vision that it is the world’s capital
market… the fact that we can help market participants to raise capital to
improve their positions,” he says. “We’ve gone through the merger, so we’re
going into a new phase. There’s a whole bunch of dynamics that were all part of
He likes the change to a sector with no safety net. “The LSE is in a
tremendously dynamic market. From a personal perspective, being in an industry
subject to that sort of change gives you a lot more ability to get involved and
help manage the response to that change and to be very proactive in your job.
The defence industry moves at a very different pace to the financial services
The technology question is one where Webb’s experience after almost a decade
with Logica, a large IT services contractor, will be key. The race is on to
provide the platform with the best liquidity, visibility and speed and
reliability. LSE customers remember with crystal clarity the technical glitch
that shut the entire exchange (and the Johannesburg Stock Exchange, which uses
its TradElect platform) for all but the first and last 30 minutes of trading on
8 September last year the day the US government announced its Fannie-Freddie
bailout; the sound of jugular veins exploding in trading rooms reverberated
across the globe as the opportunity to make a buck on briefly rallying markets
was lost; the exchange denied the crash was due to its inability to handle
increased trading activity, blaming a software issue.
Ironically, that same day, The Times published a letter from Dame
Clara, defending the LSE’s technology as cutting edge. A week later, Lehman’s
demise left Furse without a partner on the exchange’s ‘dark pool’ facility for
European equities, Baikal, part of its liquidity-boosting efforts against the
clutch of smaller pan-European multilateral trading facilities such as Chi-X
(owned by a subsidiary of Nomura bank), Turquoise (a collaboration between nine
investment banks including UBS, Morgan Stanley and Deutsche Bank), junior stock
market Plus and BATS Europe. This delayed Baikal’s launch until this summer.
“We play an important role in the financial services industry, but we’re
providing an infrastructure that these days is more IT focused,” Webb says.
“Understanding that part of the operational aspects of the business, being able
to challenge and work with the CIO and the IT people, is something I can really
bring. I’ve seen projects go well and I’ve seen projects go badly and seen those
lessons learned from what occurred.”
Running Logica’s finances was clearly a formative experience and, rarely for
FDs, involved much moving about the business. Less than 12 months after joining
as group FC in 1993, Webb was made CFO of Logica’s North American business,
preceding a stint as an executive vice president for its telecoms arm. That role
lasted five years and saw him add the communications department to his remit.
After being made COO for the region, too, he4 took a year out to complete the
BT Global Challenge yacht race before returning as European FD. Then, just 15
months in, he moved again to become FD for continental Europe. Five months after
that promotion, Webb left for Qinetiq, becoming group FC, then group CFO in late
2005 in a boardroom shakeup as the company prepared for its controversial £1.1bn
flotation. “I spent most of the time at Logica as sort of a COO for North
America even when I was wearing the CFO hat it was broader than that. The last
thing you’d ever catch me doing is just being stuck in numbers,” he concedes.
That’s just as well. The LSE’s shares lost more than 74% of their value by
the end of 2008, one of the ten worst performers in the FTSE-100 largely
because of the paralysis of debt markets which locked the door on IPOs its
primary business and on admission of new companies to its Aim market. Now it
is being nibbled by pan-European upstarts such as Chi-X and Plus. They say they
are taking business from the LSE. Webb, as expected, says the challenges posed
by MiFID-borne minnows is nothing new for the exchange.
“It’s a common misunderstanding one that I probably had before I came to
the exchange that the LSE is doing all the share trading in the UK, when it’s
only in the last couple of years we’ve reached 50%,” he says. “But some of these
new entrants have actually helped grow a whole new segment of our market that
has been very complementary for us as they provide more liquidity. We’re not
frightened by it. I would rather have a smaller market share of a growing market
than a large market share in a static market.”
One such growth market for the LSE is post-trade services, including clearing,
as fears that another big bank collapse would leave traders high and dry
highlight counterparty risk. The exchange has expanded its clearing activities
this month through LCH. Clearnet, in which it is a minority investor, moving its
international order book over to its system. It already uses LCH. Clearnet for
its other UK and European order book trades.
Some reports say LSE may join the consortium being organised to make a bid
for LCH. Clearnet led by inter dealer-broker, ICAP. Webb sounds warm on the
idea. “We’re paying attention to what’s going on and reserving our position on
it,” he says.
Webb says this is another bit of the business he is still studying. “The
post-trade operations in Italy, for a CFO, are the most complex to understand,
acting as this central counterparty in the market, protecting the market from
what might happen to other participants as was seen in the Lehmans demise. I
spent time in Rome where that business is based, just sitting with people there
who understand it so intimately and are good at explaining it to new CFOs in a
very clear manner.”
According to the Federation of World Exchanges, in terms of the total dollar
value of share trading on the top ten exchanges globally in 2008, LSE lost 37%
on the previous year compared with 21% at Euronext and 10% at Deutsche Börse.
But it still raised the most capital through primary or secondary issues in
2008 of the ten exchanges globally, with the largest investment flows, posting a
50% rise on 2007, one of only three that did not post negative gains.
(Euronext’s figures were still being calculated when this data was published.)
It will be hard to uphold that performance in 2009.
Ready for the upturn
Webb says he is focused on preparing the group, its platforms, its business mix
and its finances, for the upturn. Cash, of course, is king again. “I wouldn’t
have predicted when I joined that I would be spending a lot of time on banking
matters, because last June [the economic crisis] wasn’t so high-profile. But
within three months, I started to worry about the fact that we typically have
£140m cash on deposit and many times that amount in our clearing operations. I
started spending an awful lot of time just worrying about the risks around
What about the possibility of more suitors? “At the moment, market conditions
are quite difficult for anybody to undertake a transaction and doing a debt
finance transaction is almost impossible.
Everybody’s equity is pretty depressed so there will be some quite difficult
decisions to go through to be able to do anything. But with the number of new
entrants, whether the number is sustainable and whether that means more conso
lidation of the type we’ve had in the past or something different we’ll have
to wait and see.
I’ll never say never because I’ll only get proven wrong a month later… but
the factors out there seem to weigh against the likelihood in the short-term.”
Meanwhile, Webb is enjoying the switch from contracts-led business to a place
with little of that stability and looking forward to giving his finance team the
chance to spread their wings, too.
“The finance team has been under tremendous pressure while in bid defence
mode. It had to be very rigorous and quite ‘boxed in’ because there’s a process
and you have to follow it you’ve got advisers all over you. I want to develop
a bit more freedom for people, give people opportunities to flourish and come up
with new ideas, perhaps do things in different ways.”
Read our interview with
CFO Nemone Wynn-Evans.