As a well-travelled Frenchman, Xavier Rolet doesn’t like to waste time. Barely
have we said hello than he has sprung into a five-minute speech on strategy
for companies selling a commoditised service. Then he has moved on to the
importance of being a consolidator, not the target for someone else’s
acquisition plans.
He has been much the same since May, when he started as chief executive of the
London Stock Exchange — slicing fees and jobs, acquiring a big software
supplier, opening negotiations to buy Turquoise, a rival operation, all the
while love-bombing the investment banks that used to employ him. The London
Stock Exchange, which reports interim figures in a fortnight, seems to have
a whole new mindset.
“When you see clients creating competing entities,” he says, “that sends you a
message that relationships are not what they should be. The exchange needs
to lead from the front...”
Okay, slow down. This is all a shift in style from his predecessor Clara
Furse, who was renowned in the City for her steely intellect and combative
style, but spent so much of her eight-year reign repelling boarders — five
takeover bids — that she had little time to plot future growth.
Then in comes Rolet, 50, suddenly job-free after the collapse of Lehman
Brothers in France. He is every inch a self-made master of the universe.
Born in a poor suburb of Paris, trained by the French air force, honed by
Goldman Sachs in New York, then by Credit Suisse First Boston and Dresdner
Kleinwort Benson in London, he cites rally-driving and wine as his passions,
and has his own award-winning vineyard, Chêne Bleu, near Avignon, run by his
American wife, a former banker.
Rolet even sounds like a luxury brand. Yet in the flesh, he is a different
proposition. Tall, balding, bespectacled and preppily-dressed, he talks
non-stop, switching deftly from the detailed to the light, never losing
patience, always happy to explain his jargon-strewn sector.
He also takes the British need for mickey-taking on the chin. “You may call my
accent mongrel. I call it international,” he laughs, citing its French,
American and English roots.
As for the jokes about him being a French spy, sent in to subvert the City, he
just grins. “What is it I could possibly spy on? The exchange is a listed
company. And, by the way, my first wife was American, my second wife is
half-American, half-Italian. I think I am more of a security risk for the
French.” And he chuckles.
Driven, charming and chatty, Rolet may be just what the London Stock Exchange
needs. He is also deadly serious about the business, which is both a pillar
of the City and a FTSE 100 firm in its own right.
This month’s interim figures will show why Rolet wants to act fast. Trading
volume has fallen since last year, and too much happens elsewhere — a trend
started after the rules were relaxed on who could compete with the
established exchanges. Only about 60% of FTSE 100 order book trading now
goes through the London Stock Exchange. Then there’s futures, derivatives,
fixed-income instruments...
Unless Rolet ensures that the London Stock Exchange is strong enough to
expand, it may simply be bypassed. As an investment banker, he sat on the
boards of rival exchanges Euronext and Nasdaq Europe. He knows how others
think.
“The solution is threefold. One, you need to cut costs substantially. Two, you
need to invent a better mousetrap, hence new technology gives you an edge.
Three, you have to scale up. Once you have the lower cost base and some sort
of competitive advantage you must buy out rivals and operate on a grander
scale.”
Hence he has quickly “in-sourced” the exchange’s technology, buying Millennium
IT, a Sri Lankan firm that will develop systems for its new owner and work
on projects for outside clients. He has also started negotiations to buy
Turquoise, the rival trading platform launched by nine investment banks that
seemingly cannot agree on how to develop it further.
Uncharacteristically for Rolet, those negotiations are taking their time. “I
don’t think they will go on much longer,” he shrugs. “Either we will buy
them, or not.”
The sticking point? “That is confidential.” But if its owners cannot fund its
future, why not just let it go under?
“We believe competition is here to stay. If they don’t survive others will
come up, and more competition leads to fragmentation, especially in the
visibility of transactions. There are now a number of institutions like
pension funds saying they don’t know what is happening in markets, and a big
discussion about whether some regulation should be introduced to make
platforms more transparent.”
Rolet is adept at shifting the argument on to his own terms. He wants to
position his exchange as a key player in the globalisation of financial
regulation that must follow last year’s slump.
He cites worries over the growth in “dark pools”, which allow sellers of large
tranches of stock to find a value without moving the market. Many are run by
investment banks. The London Stock Exchange has launched its own version.
The problem now is what regulators do to restore transparency.
“Competition in market infrastructure represents an internal contradiction,”
he says. “Having a monopoly is the only sure way to promote a tight spread
and a concentration of liquidity, but it can generate abusive behaviour. And
if you have fragmentation you decrease the cost but get opacity.”
His response is to rebuild relationships with investment banks and provide a
solution. “So you put an exchange in there as the control shareholder but
with participation from other users. It’s partnership that provides what
people want from an exchange: transparency and quality of rules management.”
The reach of exchanges will also have to mirror a new global, financial
infrastructure. But so far the track record of crossborder exchange deals
has been mixed — how will he make it work?
By being flexible, and remaining strong. “There are going to be mergers and
acquisitions and pooling of assets, involving partnerships and technology
deals. For the London Stock Exchange, the key is to realise value here and
keep bidders at bay. We were worth £980m in market value when I took over;
we are worth £2.5 billion now, so we’re not cheap.”
That suggests support for Rolet’s prioritising of technology and scale —
though his business still lags Deutsche Börse and NYSE Euronext in value.
Analysts say they want more costs cut so the exchange can compete better on
price, and its ownership of Borsa Italiana used more effectively to increase
share in Europe, where volumes could triple in the next few years.
And that’s before you even look beyond equities at other products. So how
different is all this to Furse’s strategy? For once, Rolet’s flow stops.
“Maybe we were a bit arrogant and didn’t listen on fees and technology,” he
concedes eventually. “But Clara saw off five bids, two of which were highly
leveraged and were waved through by regulators — so, by the way, if they had
happened, the exchange would not be here now — but it was difficult for her
to focus on anything else. She still did the Borsa Italiana transaction that
gives us optionality and broadens our portfolio. What we want to do is
establish the exchange as a global player.”
Those who have worked with Rolet say he has the abilities to pull it off.
Jeremy Isaacs, partner at JRJ group and formerly with Lehman, describes him
as ferociously clever and brave. “He has real backbone. If he has a point of
view, he will stick to it, whatever the pressure.”
His weakness is his lack of FTSE 100 experience — though his chairman, Chris
Gibson-Smith, has that in spades. Rolet is also loquacious to a daunting
degree.
But that comes with a drive rooted in his upbringing in the tough Parisian
banlieue of Sarcelles. Both his parents fought for the French army in
Algeria. Rolet, with two sisters, worked hard to get out. After swapping the
French air force for an MBA at Columbia University in New York, he found a
mentor in Goldman Sachs’s Robert Rubin, who went on to head the US
Treasury for President Bill Clinton.
Rolet cut his teeth in risk arbitrage, and later moved to London to co-head
European equity sales in 1990. He joined Credit Suisse First Boston in 1994
and Dresdner Kleinwort Benson three years later. By 2000 he was deputy
co-head of Lehman’s global equity trading. In 2007 he became chief executive
of Lehman in France.
Any happy homecoming was cut short when the American bank collapsed in 2008.
Did he see it coming? No, he says, though it is plain he blames senior
management in New York for failing to secure a merger that might have saved
Lehman.
Equally, he questions the logic of letting Lehman go under. “Has it
contributed to rebalancing the moral hazard, or done the opposite of what
was intended? Would a government let a bank fail now? No. So the unintended
consequence is never to let it happen again.”
He shakes his head. He was lucky. Lehman in France was sold cleanly without
going into administration. “If it had, it would have been less credible for
me to aspire to directorships,” he admits.
The offer from the London Stock Exchange came out of the blue. Would he have
taken it in normal circumstances?
“It’s challenging but I think I was born for it,” he grins. “I know the client
side. I can see the technology and cost problems — not being chief executive
of a FTSE firm, that’s the issue.”
As for being French, London’s strength is that it is international. “On my
executive board I have two Italians, an Irishman, a Briton, a Sri Lankan and
me. It’s about competencies.”
So will he cut his dividend to fund a war-chest? It has been suggested. He
frowns. “I can’t comment,” he says, but hints that it’s unlikely.
Then he lets his guard down. “Look, the story of the London Stock Exchange is
that these guys did not manage to upgrade their model, they’re coming off a
monopoly position into a violently competitive market, and they are going to
be obsolete. And part of that is true. That’s why I am taking a lot of
steps.”
Yet some feel he is heading only one way: turning the London Stock Exchange
into a technology business. In a decade, a new boss will come from Microsoft
or Google, not investment banking.
For Rolet, that’s fine. And 20 minutes later he is offering to send me a
bottle of his esteemed wine. Vive la différence — investors can
make up their own minds later.
The life of Xavier Rolet
Vital Statistics
Born: November 12, 1959
Family status: married, with three children
School: Lycée Sarcelles, Paris
Universities: Ecole Supérieure de Commerce, Paris, and Columbia, New
York
Pay: £650,000 plus a bonus of up to 225%
Home: Pimlico, London
Car: Land Rover Defender
Book: Julius Caesar’s Commentaries on the Gallic and Civil Wars
Film: The Searchers
Music: Erik Satie, Ravel
Gadget: Scubapro regulator for diving
Last holiday: South Pole on L’Astrolabe oceanographic ship. “I have a
lot of friends in the geopolitical and defence studies world.”
Working Day
The chief executive of the London Stock Exchange wakes at his house in
London’s Pimlico at 6am. “I start by calling Asia,” says Xavier Rolet, “and
get a feel for the markets.”
He takes the Tube to his office in Paternoster Square, by St Paul’s Cathedral,
for an 8am start. “Every day we have a one-and-a-half hour executive
committee meeting. It used to be 16 people twice a month; I’ve reduced it to
six people daily. We look at strategy, new opportunities, tactical reviews
and then day-to-day stuff.” Rolet will often lunch contacts at Le Gavroche.
He will also attend functions in the evening, rarely getting home until
10pm. Twice a week he travels outside London.
Downtime
“I love skiing, rally-driving, scuba-diving and bee-keeping,” says Xavier
Rolet, listing his favourite pastimes. The bees reside at his vineyard near
Avignon, which is overseen by his wife, his sister and his brother-in-law.
“Chêne Bleu, our white, just got a gold medal at the International Wine
Challenge in London,” he says.
He recently competed in the Paris-Dakar rally. “Friends said it was a mid-life
crisis but it is probably ongoing.” He is now prevented from competing again
as a FTSE 100 chief executive.
“I couldn’t get the insurance,” he says glumly. He was 50 last week but says
he has no plans to celebrate. “I’ll be away.”
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