LSE Bonhomie with Italian MTS to Continue

The London Stock Exchange Group is Europe's largest and most diversified of stock exchanges, incorporating both Borsa Italiana of Italy and London Stock Exchange of the United Kingdom. The group has more than 500 member firms and has in excess of 3,000 companies whose shares are quoted across its markets, the Group is the operator the largest and most liquid equity marketplace in Europe. The Group offers trading in a wide range of instruments, holding the number one position in trading exchange traded products (ETFs and ETCs) and through its interest in MTS, is the leading platform for the trading of fixed income products. Through MOT (Italian fixed income market) it offers a comprehensive range of European corporate and government bond and fixed income trading services. Its Italian Derivatives Exchange Market (IDEM) sees over €2.5 billion worth of trading every day, and through EDX London the Group provides a facility for the trading of Scandinavian and Russian equity derivatives. London Stock Exchange Group also offers post-trade services such as netting, clearing and settlement on an efficient and competitive basis. These include services from Monte Titoli, the Central Securities Depository for all Italian financial instruments, and Cassa di Compensazione & Garanzia (CC&G), which in July 2009 was granted Recognised Oversaeas Clearing House (ROCH) status by the FSA to operate in the UK. The London Stock Exchange boasts itself to be the world’s largest stock exchange with the most international flavor, playing host to as many as 600 overseas companies from more than 70 countries that have chosen to quote their shares on this market. These numbers also include the shares of international companies listed on the AIM, the London Stock Exchange's growth market, which has now grown on to become one of the most successful markets for small and medium sized enterprises in the world.

Borsa Italiana S.p.a is an Italian Stock Exchange based out of Milan. It facilitates domestic share trading in Italy, regulates its procedures, regulates admission and listing of companies on the stock exchange, regulates intermediaries and supervises regulatory disclosures made by listed companies on the exchange. The exchange which was owned by the Italian government till 1997 was privatized and became a company with effective from 2 January 1998. The exchange was subsequently acquired by the London Stock Exchange Group in 2007 when it became its subsidiary effective from 23 June 2007. The exchange is under the governance and regulatory control of the Commissione Nazionale per le Società e la Borsa (CONSOB), the regulatory body appoint of the Ministry of Economy and Finance, based out of Rome in Italy.

Borsa Italiana is further divided into three main trading segments called; MTA, the equity trading market segment, that is dedicated to mid-size and large-size companies. This segment is again having two sub-segments: STAR, which is meant for mid-sized companies, and MTA International, which plays host to shares from non-Italian companies already listed on other European stock exchanges and are publicly traded. The AIM Italia, established in line with the AIM segment of the London Stock Exchange plays host to stocks of small and medium high-growth companies and MIV (Market for Investment Vehicles), on which retail and professional investors operates on investment vehicles having a defined strategic goal. The FTSE group also provides its indexing services for this exchange. It operates the FTSE MIB index which contains 40 of the most traded companies belonging to top 10 economic sectors listed on the Borsa Italiana, the FTSE Italia All Share index, the FTSE Italia Mid Cap index and the FTSE Italia Small Cap index.

There has been news recently of the London Stock Exchange group moving the MTS bond trading platform from Milan to London. However, officials from both the exchanges have come out and denied the news.

Since the decision of the United Kingdom to exit the European Union, there has been intense speculation on many fronts leading to large scale confusion within both the trading blocks.

Speculations in this regard became rife after the London Stock Exchange Group went ahead with its plans to acquire Refinitiv, the information service providing arm of Thomson Reuters. This development, many in the Italian government circles believe was a first step towards centralization of actual clearing and post trading operations, resulted in the operations of MTS being merged with the operations of the Group at the London Clearing House (LCH) in London. The speculation also gets its weightage form the fact that Refinitiv also has similar trading platforms called Tradeweb TWO.O for fixed income securities like the MTS and it will be an un-necessary redundancy for the London Stock Exchange group to maintain two similar trading platforms.

The Italian Authorities are a worried lot because of the rumors flying around and also with the developments going on at the London Stock Exchange group. Last month a law was passed in the Italian Parliament which empowers the Italian Government to take all necessary steps to protect the Milan based exchange from all possible threats. The exchange is of strategic importance to the Italians, which hosts nearly all of its public debt in trading instruments. The BondVision trading platform on the MTS is used by International Investors as well as the bank of Italy for trading in Italian Government banks with volumes hovering at an average of 5 to 6 billion Euros on a per-day basis.

The London Stock Exchange Group authorities were however quick to realize the concerns of the Italian authorities and have given assurances that they would continue to invest in the Italian trading infrastructure.