Decisive: David Schwimmer says London reacted quickly to war
As a former banker at Goldman Sachs in Moscow, David Schwimmer should be the right person for the right job as chief executive of the London Stock Exchange Group.
The combative American – not to be confused with his more famous namesake who plays Ross in Friends – flatly rejects any suggestion that the LSEG, home to more than 40 listed Russian companies, has been slow when it comes to suspending the trading in their shares. or kick them out of the main London indexes.
“I think that perception is wrong,” Schwimmer tells me as he wiggles in the back of a cab on a post-Covid business trip to New York City.
“We implemented the changes very quickly and worked closely with the [UK] regulators and government,” he says.
A fervent defender of the LSEG’s role as a pillar of the City, he contrasts the speed of reaction of London and its markets to what is happening in his native United States. “It’s probably worth taking a step back on this. When the United States implemented its sanctions on February 24 and 25, they gave the markets until May 25 to get out of these titles… so three months.
“What I mean is that we and the markets acted very quickly to halt trading on the London Stock Exchange, to remove the stock from index data.”
The war against Ukraine, the risk for global financial stability and the bite of financial sanctions against Russia are currently at the top of the agenda of the boss of the Stock Exchange.
But since taking over from his controversial predecessor Xavier Rolet in 2018, he has focused on transforming LSEG into the world’s leading business and information presence. The depth and breadth of LSEG has been transformed by the £20 billion acquisition of Refinitiv – the trading and data group spun off from Reuters Thomson.
He may prove to be the ultimate bulwark against the array of bidders from the United States, Germany and even Scandinavia who over the years have been rebuffed by his predecessors.
A Harvard-educated Anglophile who makes no secret of his preference for London over New York, Schwimmer, 53, is a strong advocate for keeping derivatives trading and settlement in the Square Mile post-Brexit.
He is working closely with the government to re-list Cambridge-based tech champion Arm Holdings to the London market he belongs to – tempting him to leave New York. He views much of the comment that New York’s Nasdaq is better for IPOs than London’s stock exchange as “silly”. For now, Schwimmer’s eyes are fixed on the conflagration in Ukraine. Putin’s brutal war underscored the value of World-Check, owned by LSEG, one of the little-noticed companies that was part of the Refinitiv deal.
“The financial markets rely very heavily on sanctions compliance on our World-Check content. Institutions around the world use it to show that they are not dealing with sanctioned individuals,” says Schwimmer.
World-Check is considered the leading database used by banks, corporations and NGOs to perform background checks when hiring new clients and ensuring they comply with anti-money laundering rules. money, “know your customer” and penalties.
Will the sanctions make it possible to tame the Russian bear?
“The sanctions regime put in place has been much more effective and more aggressive than what we have seen in the past and I would assume more aggressive than what the Russian government expected,” said the LSEG boss.
“He is very effective in creating economic stress in Russia and sending a clear message that Russia will not participate in the global economy because of this behavior.”
Schwimmer generally believes that the global financial system is better able to absorb the shock caused by the sanctions than it was in the fall of 2008, when a U.S. government decision to allow investment bank Lehman Brothers to file for Chapter 11 bankruptcy triggered a financial disaster.
“We actually had a default from VTB Capital on the London Clearinghouse (part of LSEG) following sanctions. But everything worked and the guarantees we had from the failing banks covered the positions.
The financial system may not yet have collapsed as it did after Lehman. But you never know where the weakness will show up.
“You have to be careful whenever there is fragility and disruption like we are seeing right now, because there may be weaknesses in the system or unintended consequences that we are not yet aware of,” warns Schwimmer.
Looking across the global landscape, Schwimmer is far from optimistic, even though he claims not to be in the “prediction business”. He sees risks coming from the war in Ukraine, the surge in commodity prices and in the background he points to Covid and the impact this is having on Chinese equities.
“There are a number of risks and more pressures on the market than on economic activity.”
When it comes to tech IPOs, the shaven-headed and pugnacious exchange chief fiercely rejects the opinion – championed by former BT boss Gavin Patterson, embattled founder of The Hut Group, Matt Molding and d others – that London is the wrong place.
“We have a healthy market in London and we also have a very strong environment for private equity.
“London continues to be a very, very robust and prosperous financial center,” insists the American.
He challenges the fashionable notion that New York and the Nasdaq market in particular is the best place to float Arm Holdings. So far, that seems to be the path advocated by billionaire Masayoshi Son, the founder of Arm owner SoftBank.
“I think the narrative that technology always has an easy run and spectacular performance in New York is a bit silly.” The performance, for example, of the biotechnology sector in New York has been abysmal,” adds Schwimmer.
He also thinks it’s important that a company like Arm, which is headquartered in the UK and where its business mainly operates, is in London if it wants to feature in key indices.
Schwimmer reveals he is working closely with the government to ensure London remains competitive and – under more normal market conditions – attracts big business to the City.
The Ukraine-Russia conflict could also be a turning point for ESG investing, he says. Over the past two years, investors felt that if they took cash out of fossil fuel companies, “they ticked the ESG box.”
Given the hostile geopolitical climate, he says as a steward of one of the world’s largest natural resource markets, ESG “isn’t a sophisticated enough way to think about challenges.”
As the architect of one of Britain’s biggest and most ambitious takeovers in recent times – the relocation of Refinitiv – Schwimmer should be a national hero. Instead, he faces the slings and arrows of investors with a short-term view.
The Ukraine crisis, the volatility and the trading profits it generated made his deal smarter for LSEG investors – and boosted the appeal of the Square Mile as a European financial hub.
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