There’s been a lot of uncertainty since 2016 on how Brexit will affect the UK economy. So much so, that in September 2018, New York overtook London for the first time since 2015 as the world’s top financial centre.
But has the Brexit referendum strengthened investor confidence in the UK’s financial sector?
The UK is home to The London Stock Exchange Group (LSEG) which is the British-based London Stock Exchange and financial information company headquartered in London.
London Stock Exchange (LSE) is one of the world’s oldest stock exchanges and can trace its history back more than 300 years. Long before the UK joined the EU in 1973.
It owns a number of subsidiaries including the Borsa Italiana, the Italian Stock Exchange, and MillenniumIT, a Sri-Lankan based IT firm specialising in electronic trading.
LSEG generated more than £2.1 billion in 2018, has 4,908 employees (as at 2017) and boasts a stock price on their own London Stock Exchange of £4,964 under ticker symbol ‘LON’.
Since the 2016 referendum, the London Stock Exchange Group stock price has grown by 69.5% making it the best performing financial stock across Europe.
As new fintech’s (like us) make waves to reduce trading costs for consumers, the LSE has diversified away from making money from trading fees and instead, has shifted towards data feeds as a more reliable source of revenue.
You may have heard of the term ‘market data’, this is the price and trade related data, like graphs, for stocks listed on stock exchanges.
Often 15-minute delayed data is free, however, when you’re buying/selling you need to know the live market price of the stock.
In order to provide live market data to consumers, Stock Brokers and Stock Broking Fintech’s, like us, have to pay/be authorised to distribute this market data from the stock exchange. For the London Stock Exchange, these fees for this range from £4,500 to upwards of £80,000 per year.
So, it’s not surprising that the LSEG’s revenue increased by 8% last year and their operating profit also increased by 15%.
LSEG also have an index business which is among the top providers in the industry and is linked to the US $5 trillion exchange-traded fund market –
Indexes track a section of the stock market and exchange traded funds are the vehicle you invest in that track an index, and therefore a section of the stock market.
Their clearing operations, which handle the back-office details of buying/selling on the stock exchange, are also growing and generate more than a third of their profits. European regulators have already given London based clearing firms a one-year licence so they can continue to handle the back-office details of buying/selling on the stock exchange for foreign brokers. The US regulators have also made similar reassurances.
If Britain ever manages to leave the EU, the result is uncertain, but for now, the London Stock Exchange’s performance shows that investors are still confident in London as one of the world’s top financial centres.
It could be time to add London Stock Exchange Group to your watchlist.
Please know, the value of investments can go up as well as down and you may receive back less than your original investment, meaning, when investing your capital is at risk.
Disclaimer: At Evarvest we believe in making investing and investment education more accessible, but we don’t provide investment advice and individual investors should make their own decisions. While we try our best, we cannot ensure the accuracy of the information we provide.
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