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 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 so there’s plenty to keep me occupied without
having any thoughts on the longer term,’ he says.
At any rate, ten days after we met the exchange announced it had 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 2000.
No safety yet
If Webb sought a challenge, he chose the right time to join the LSE, which is
accused by many of failing to keep up with growing competition. Some say that,
despite being the world’s most important, 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 and exchanges’.
It was these challenges that attracted Webb away from his role at QinetiQ. ‘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 the attraction.’
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
Learning the lessons
The technology question is one where Webb’s experience with Logica, a large
IT services contractor, will be key. The race is on to provide the platform with
the best liquidity, visibility, speed and reliability.
LSE customers remember the technical glitch that shut the entire exchange 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
‘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.’
Running Logica’s finances were 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, he 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 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. The last thing
you’d ever catch me doing is just being stuck in numbers.’
Facing the challenges
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. 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 says the challenges posed by MiFID-borne
minnows is nothing new for the exchange.
‘It’s a common misunderstanding 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. 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 last 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
Webb adds 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.’
Cash is king
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. It will be
hard to uphold that performance in 2009.
Webb says he is focused on preparing the group 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
in our clearing operations. I started spending an awful lot of time just
worrying about the risks around that.’
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 difficult decisions to go through to be able to do
‘But with the number of new entrants, whether the number is sustainable and
whether that means more consolidation 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.’
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.’
This is an abridged version of an article that first appeared in
Financial Director. See the full
article and other profiles at
2008–present: Chief financial officer, London Stock Exchange Group
2005-2008: CFO, QinetiQ
2003-2005: Group financial controller, QinetiQ
Jan-May 2003: Finance director, continental Europe, LogicaCMG
2001-2002: FD Europe, Logica
1995-2000: Various roles with Logica including CFO, North America, COO, North
America and executive vice president, Telecoms, North America,
1994-1995: Group financial controller, Logica
1982-1994: Various roles, PwC
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