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London calling

Outfoxed by Euronext in futures and clearing, Clara Furse is now staking the London Stock Exchange's future on a bold bid to capture the market in Dutch stocks.

In the battle for preeminence among European securities exchanges, Clara Furse boasts an unenviable record. Two years ago, shortly after joining the London Stock Exchange, Furse sought to acquire the London International Financial Futures Exchange in a bid to reassert the LSE's leadership after the disastrous failed merger attempt with Deutsche Börse. She lost out when Liffe was snatched away by the wily Jean-François Théodore, chairman and chief executive of Paris-based Euronext.

For the past year Furse has fought hard against the proposed merger of London Clearing House, which clears LSE transactions, and Clearnet, the rival clearer controlled by Euronext. Furse fears that the deal will put upward pressure on clearing fees and blunt the LSE's ability to compete. But once again she appears destined to lose to Théodore: Concessions by Euronext have persuaded most of London Clearing House's user-owners to back the deal.

Facing a second stinging defeat on her own turf, Furse now is going further afield in search of success. She wants to steal business in Euronext's own backyard. The LSE is preparing to introduce Dutch equities on its electronic order book, the Stock Exchange Electronic Trading Service, or SETS, hoping to snare a big chunk of trading volume from Amsterdam, one of Euronext's four core markets. Furse follows in the footsteps of Deutsche Börse, which will launch a somewhat less ambitious Dutch share-trading service this month.

Investment bankers across Europe are keeping a keen eye on the Amsterdam developments. If Furse succeeds, she could unleash a wave of competition that would drive down the region's still-high trading costs, to the benefit of brokers and investors alike. A success would also bolster the LSE's claim of being the most liquid and lowest-cost service provider among Europe's major exchanges and enable London to approach the consolidation endgame as an equal of Frankfurt and Paris rather than as takeover bait.

"It's hugely significant," Martin Wheatley, the LSE's deputy CEO, told Institutional Investor in a recent interview. "The Dutch market is a good test ground to see if we can get genuine competition" among European exchanges.

Success is far from guaranteed, however. Liquidity in Europe's fragmented equity markets is notoriously hard to shift, a fact discovered by upstarts like Switzerland's virt-X. London's own track record on strategic initiatives -- its bungled attempt to merge with Deutsche Börse in 2000 followed a decadelong series of problems -- hardly augurs well. Furse was hired after the merger collapse to provide new direction for the LSE, but many bankers are actively questioning her strategy after seeing her outfoxed twice by Théodore. More worrying, her efforts to generate revenue growth by raising trading fees have alienated many large investment banks and brokers. With support ebbing, Furse can't afford to fail again.

The LSE, says Alan Hodson, global head of equities at UBS in London, "is looking like the third player in Europe." Winterflood Securities chairman Brian Winterflood, who played a key role in torpedoing the Deutsche Börse deal and has supported Furse in the past, concedes that his patience is running short. "I'm still on her side, but only just," he says.

The pressure on Furse, who declined to be interviewed for this article, is all the more intense because of the recent arrival of a new chairman, Chris Gibson-Smith, at the LSE. His predecessor, Don Cruickshank, fought strenuously to maintain the exchange's independence after the merger fiasco. Gibson-Smith is a strategic thinker with no ax to grind. Shortly before taking up his part-time post at the LSE in July, he took time to meet with Théodore and with Deutsche Börse chairman Werner Seifert. Both men have made no secret of their desire to acquire the London exchange. Gibson-Smith also has taken care to stroke his investors and users and to solicit their views about the exchange's future. Many bankers believe that he will be more open to a merger than his predecessor, even if he shows no eagerness to do a quick deal.

Furse has compounded the pressure on the exchange by making some missteps on both the Amsterdam initiative and the LCH-Clearnet deal. Her initial pitch to Dutch brokers was based on the assumption that LCH would provide the same cut-price clearing service it offers in London, but she never confirmed that assumption with the clearinghouse. Then, believing that Euronext was using the LCH-Clearnet merger to thwart her Amsterdam plans, she appealed directly to major investment banks to stop the deal, contending that it would drive up fees by turning the user-owned LCH into a for-profit, clearinghouse monopoly. Far from expressing sympathy, however, many banks accused Furse of hypocrisy, pointing out that the LSE itself has imposed stiff price increases over the past year. To many of the exchange's biggest customers, Furse's attitude smacked of the arrogance that many bankers believe cost her the Liffe battle.

"It was a little bit rich hearing the LSE complaining about this new entity having a monopoly that one could use to drive up tariffs," says Alan Watson, head of equities at BNP Paribas in London. "We thought, 'Well, doesn't that describe yourself?'"

Furse has begun to back down on clearing, a sign that her options are narrowing. Last month the LSE reached an agreement with Clearnet to provide clearing for its Amsterdam trading service, largely because Dutch brokers did not want to have to change their existing clearing arrangements to trade on the LSE. Most bankers believe that a similar logic will prevail in London and lead Furse to strike a clearing deal with LCH-Clearnet. The LSE is discussing alternative clearing arrangements with Deutsche Börse's Eurex Clearing subsidiary, but Winterflood says there would be "a lot of opposition" to such a deal. "We are perfectly happy with what is happening" in the LCH-Clearnet merger, he adds.

To be sure, Furse does have a number of things working in her favor in Amsterdam. Many Dutch brokers are dissatisfied with Euronext's fees and the unreliability of its NSC trading system, and they are eager for an alternative.

"We think competition is good for the market because Euronext is a very French-driven, inflexible organization," says Jan Stam, head of the Dutch Brokers Association, which invited the rival offers from the LSE and Deutsche Börse.

Many big investment banks also hope that the LSE succeeds and prompts a much-needed flurry of competition among exchanges across Europe. For all the talk of rivalry among the LSE, Euronext and Deutsche Börse, they face almost no competition on their respective home fields. Trading in U.K. stocks stays in London, where the bulk of liquidity in those shares resides, while Frankfurt has a lock on German shares and Euronext controls the Paris, Amsterdam, Brussels and Lisbon markets. This arrangement, plus structural changes that are sharply reducing the size of the average equity trade, have enabled the exchanges to drive up fees despite the weakness in stock prices earlier this year. Deutsche Börse raised its tariffs by about 14 percent at the start of this year, and the LSE upped its own fees by about 8 percent in April.

"That was totally unacceptable to a market that was going through extreme difficulties," says Alan Yarrow, vice chairman of Dresdner Kleinwort Wasserstein and chairman of the London Investment Bankers Association's securities trading committee. "There is effectively a local monopoly at each of the exchanges because of the stickiness of trading. If exchanges continue to pursue regional monopolies, we will have no option but to go to the competition authorities."

It's a troubling sign for Furse that some investment banks express mounting frustration over the LSE's fees and assert that the exchange has been much less willing to negotiate concessions than Euronext. UBS doubled its volume at Euronext this year after Théodore renegotiated the bank's fees, making it more attractive to pursue high-transaction-oriented strategies like statistical arbitrage, says Hodson. "Euronext has been the most responsive to our demands," he notes. Paul Reeves, head of European equities execution at Deutsche Bank in London, also says that Euronext has been more flexible than the LSE on fees. "They were very proactive in their approach," he says.

LSE executives dispute the claims of excessive fee hikes. They point out that because of statistical arbitrage, program trading and other strategies, the average size of equity trades has fallen sharply -- to a current £22,000 ($37,000) from more than £60,000 three years ago, while the number of trades has surged nearly fourfold, to about 220,000 a day. More trades mean higher overall transaction costs.

The LSE needs to keep big users happy if it hopes to fulfill its ambitions in Amsterdam. The exchange hopes to win at least one third of the volume in Dutch stocks within a few months of launching its service in the first half of next year, says Wheatley, who is leading the Amsterdam push. Doing so, he asserts, will set a crucial precedent, because technology improvements and consolidation at the clearing and settlement level will facilitate full-fledged competition among exchanges in all major European stocks within the next two to three years.

"Our service record is second to none, and we know we are the low-cost provider," Wheatley says. "We start from a position where we have an advantage."

Indeed, the LSE has many advantages. London remains by far the preeminent financial center in Europe, with many more investment banks and fund managers than Frankfurt and Paris combined. The LSE ranks second only to the New York Stock Exchange in the number of international stocks listed, with 391. It handles an average of about £14 billion (E20 billion) worth of equity transactions daily, compared with Deutsche Börse's E8 billion and Euronext's E6 billion. The LSE has remained open for IPOs despite the market downturn, with eight deals raising £1.35 billion on its main market in the first nine months of this year and 25 IPOs raising £458 million on AIM, its secondary market for new technology stocks. By contrast, Euronext has had just nine IPOs this year, and Deutsche Börse hasn't had any.

But it is an enduring irony of the European exchange rivalry that despite its strengths, the London Stock Exchange starts the consolidation game in third place because of the narrow base of its franchise. The LSE depends on equities trading for fully 39 percent of its revenues, compared with 22 percent for Euronext and just 14 percent for Deutsche Börse. That business risks becoming commoditized if the exchange's Amsterdam effort unleashes genuine competition in European equities trading -- although the LSE believes it can offset any price pressure through market share gains. The exchange's other cash cow, information services, generates 45 percent of revenues but also faces pressure because of cutbacks in the financial services industry and new competition in the provision of U.K. regulatory news. The remainder of the LSE's revenues come principally from listing fees.

London has no real exposure to clearing and settlement or the booming derivatives markets. Those two sectors generate 66 percent of revenues at Deutsche Börse and 54 percent at Euronext. Derivatives will account for almost half of revenue growth at European bourses in coming years, estimates Huw van Steenis, an analyst who follows the exchanges at Morgan Stanley in London. Derivatives volume surged 43 percent, to 524 million contracts, in the first half of this year at Deutsche Börse's Eurex exchange. Furse, who wanted to buy Liffe to plug her derivatives gap, is now scrambling to get into the business through a joint venture with Sweden's OM dubbed EDX London, but it will be very difficult to poach business from the liquid, established markets at Eurex and Euronext.liffe. Today the LSE's market capitalization is the equivalent of E1.5 billion, compared with E2.6 billion for Euronext and E5 billion for Deutsche Börse.

THE LSE'S ATTEMPTS TO SHORE UP ITS POSITION over the past decade have typically ended in disaster. The exchange's failed attempt to develop an electronic settlement system called Taurus in the early 1990s cost it more than £80 million, cost member firms £400 million and resulted in the sacking of then­chief executive Peter Rawlins. His successor, Michael Lawrence, was forced out in 1996 because of disputes with exchange members over the costly development of a new electronic trading system, SETS, which nonetheless became a big success. In 2000 the exchange fired CEO Gavin Casey after members revolted against his proposed merger with Deutsche Börse. Furse was a surprise choice to replace Casey.

Born in Canada to Dutch parents, Furse, 45, was educated in Colombia, Denmark and the U.K. and studied at the London School of Economics. Then she headed straight for the City, where London's financial markets were poised for explosive growth at the start of the Thatcher era. She started out as a broker at Heinold Commodities in 1979, then moved to Phillips & Drew in 1983 to help set up a bond futures sales team. She rose in the firm, which was later acquired by UBS, and from 1993 to 1998 she ran the Swiss bank's global futures and options business. In 1998 she became chief executive of Credit Lyonnais Rouse, the derivatives arm of the French bank. Throughout the '90s Furse served on the board of Liffe, where she did a two-year stint as deputy chairman from 1997 to 1999. Cruickshank recruited her to the LSE in February 2001. An intensely private person who insists that weekends are family time, Furse lives in South London with her husband, Richard, a business executive, and her three children.

Furse's no-nonsense style and sharp commercial focus as a market practitioner were arguably just what the exchange needed after the collapse of its planned merger with Frankfurt. She worked with London Clearing House and Crest Co., the settlement firm, to launch a central counterparty, which cut traders' costs significantly by enabling the netting of equity positions. She also ended a long debate about demutualization by floating the exchange's shares in the summer of 2001. The LSE didn't raise any fresh cash with its flotation, unlike Deutsche Börse and Euronext, which swelled their coffers with IPOs, but the transition to a publicly listed company gave Furse greater flexibility to pursue strategic deals. It also ended the LSE's control by broker-members, who had torpedoed the German deal.

Ironically, it was Furse's background in futures -- her biggest strength in coming to the LSE -- that led to her biggest failure. When Liffe chairman Sir Brian Williamson signaled in September 2001 that the exchange would entertain offers, Euronext's Théodore and Furse quickly sprang into action. Furse opened with a slightly higher bid, but hers was in cash and shares, while Théodore made an all-cash offer. Then Furse and her team made a serious blunder. They underestimated the number of stock options held by Liffe management by nearly 2 million; paying for them would raise the takeover price by about £29 million. Instead of putting up the extra cash to win over wavering Liffe shareholders, Furse cut the LSE's offer by 5.5 percent, saying she needed to protect the interests of her own shareholders.

Furse compounded her problems by offering less power and autonomy to Liffe executives than Théodore did. Sir Brian and his chief executive, Hugh Freedberg, wanted to continue running the business and marketing Liffe's highly regarded electronic trading system, Connect, to other exchanges. Théodore was only too happy to say yes and promise to move all of Euronext's derivatives business onto Liffe's Connect platform. But Furse balked. She wanted the LSE to develop an integrated electronic platform for equities and derivatives, with Sir Brian and Freedberg relegated to deputy roles in the combined business. When decision time came, Liffe's board rejected Furse and accepted Théodore's £550 million offer.

Most bankers put the blame squarely on Furse's shoulders, saying her arrogance and lack of strategic sense cost the LSE a merger that most of the City would have relished. Furse "overplayed the London hand," says a senior Liffe executive, noting that she failed to recognize the dynamism that Sir Brian and Freedberg had brought to the exchange in 1999, just after Furse left its board. The two had rescued the exchange from a precipitous decline by launching Connect and introducing new contracts, including single stock-option futures. "It was not the sort of place she knew," says the Liffe executive. "It was far more commercial. It had looked death in the eye. She didn't realize that."

Furse took plenty of flak for letting Liffe get away. Called to appear before the House of Commons Treasury Select Committee in January 2002, she was grilled by angry members of Parliament who accused her of "flailing around" in search of a strategy. At times it did look that way: Furse held preliminary merger talks with Nasdaq, only to see the U.S. exchange retrench and shut its European arm in the depth of the bear market in 2002.

Since the failed Liffe bid, Furse has launched a number of growth initiatives. The LSE acquired Proquote, a Web-based provider of real-time share information and trading, for up to £22 million in February and has been marketing it aggressively to small and medium-size U.K. retail brokers, selling more than 1,400 screens to 100-odd firms.

Furse also is seeking another way into the derivatives markets, via Sweden. Launched in December 2002, the EDX London joint venture with OM offers trading in Scandinavian equity options and aims to introduce U.K. equity derivatives next year. Although EDX so far offers more potential than profits, Furse gained some credibility for her plans in August when she hired Nic Stuchfield, the man who launched the Tradepoint electronic exchange, to head EDX. But the new venture will have to move quickly to have any chance of catching up with Eurex and Euronext.liffe. The latter has already announced plans to provide clearing of trades in over-the-counter equity options, an area that is EDX's prime target.

Furse's efforts may have potential in the long run, but they offer little prospect of an immediate payoff. "We're not yet convinced the new projects will pick up the baton" on growth, says Morgan Stanley's van Steenis.

In the meantime, the LSE faces continued pressure in some of its core businesses. Consolidation and cost-cutting among investment banks and fund managers will reduce the number of terminals receiving the exchange's information services by about 12 percent this year, van Steenis estimates. Furse has launched several initiatives to milk the exchange's data, including Corporate Data Warehouse, an Internet-based, real-time service that provides data on market liquidity, risk and performance in addition to simple share price information. But even with these efforts, information services are likely to be flat this year after several years of double-digit growth.

Meanwhile, fees for reporting off-exchange international equity trades (a practice required by U.K. regulations) are collapsing in the face of competition from virt-X, the Swiss-owned electronic exchange. The LSE charges a fee of 20 pence per transaction, which for some big investment banks can mean an annual bill in the millions. Virt-X has taken a significant chunk of the business by charging a flat fee of £50,000 a year. Van Steenis estimates that the LSE's international reporting revenues will drop by one third, or nearly £6 million, this year.

The exchange has even taken a hit on its imminent move to new offices in the redeveloped Paternoster Square, opposite St. Paul's Cathedral. The LSE took extra space when it leased the property in 2001, but a collapse in rental demand in the City forced it to take a £22 million write-off in the fiscal year ended March 31.

Internationally, Furse has focused the bulk of her attention away from Europe. The LSE struck a deal last year to provide its SETS trading system to the Johannesburg Stock Exchange. It also has courted Indian technology companies to list on its AIM growth market.

But one of Furse's biggest objectives, a deal with Hong Kong Exchanges and Clearing to facilitate the dual listing of Chinese stocks on the Hong Kong and London markets, has stalled. The two sides announced an agreement in principle last year, but executives at HKEx cast doubt on that deal in October when they issued a statement saying that they had no plans to change their rules to facilitate dual listings. That prompted Furse to cancel at the last minute a planned trip to Hong Kong to meet with HKEx chief executive Paul Chow. HKEx executives believe that the regulatory barriers to any deal lie mainly in London, and in any event, Chow appears more interested in cementing his links with the Chinese companies than in giving a helping hand to London. "I don't think there's too much to be gained from the HKEx point of view," says David Webb, a nonexecutive director at HKEx.

It makes sense to exploit the LSE's franchise as one of the leading markets for international equities, but few bankers expect serious revenues to flow from China or India any time soon. A genuinely transforming transaction will have to happen closer to home, where the pressure for consolidation is increasing and many of the exchange's big users are frustrated by its apparent lack of strategy. "They've got to do a deal in Europe," says an executive at a major investment bank in London. "I can't understand why they're not talking to some of the smaller players, like Italy." The Borsa Italiana's equity derivatives business in particular could help the LSE catch up to its rivals, the executive adds.

Furse's only European card is Amsterdam, and she will have to play it well if she hopes to succeed. Once again, the LSE is playing catch-up. The exchange announced details of its offering late last month and won't launch its service until the end of next March; Deutsche Börse's alternative service goes live this month. But the LSE's Wheatley contends that given the initiative's importance, it's better to get the design of the service right than to be first to market.

The LSE's initial proposal, presented to Dutch brokers in the spring, was a thinly disguised attempt to arbitrage the lower cost of clearing at LCH compared with Clearnet. LCH charges the equivalent of E0.35 to clear a transaction in London, while Clearnet charges E0.65 in Amsterdam. But the LCH-Clearnet merger, which was finally announced in June after nearly two years of negotiations, promises to eliminate that differential.

Furse's initial reaction was to cry foul. At a meeting with senior City executives at the London Investment Banking Association shortly after the LCH-Clearnet merger was announced, Furse slammed the deal, according to several executives who were present. By replacing the user-owned LCH with a for-profit entity, the merger would put upward pressure on clearing fees, despite the stated intention of LCH and Clearnet to reduce fees over time, she insisted. She also accused David Hardy, LCH's chief executive, of seeking to undermine her Amsterdam ambitions by reneging on an initial offer to provide clearing for the Dutch market at London prices.

Hardy hit back by giving his version of events to LIBA members in writing, along with details of his discussions with the LSE. He asserted that his operation couldn't commit to a firm clearing price in Amsterdam yet because there was no guarantee that the LSE would grab sufficient volume to make an investment worthwhile. Bankers say Hardy's response shot holes through Furse's argument. "The LCH has behaved reasonably in this matter," says Watson of BNP Paribas.

Furse's position also suffered as the LCH-Clearnet merger gathered momentum. Apart from Théodore, perhaps, nobody thinks it's a perfect marriage. Most market participants share Furse's concerns about clearing fees and would prefer clearing to remain a nonprofit utility. But everyone is looking for consolidation to cut costs, and LCH-Clearnet is the only deal on offer.

Furse seemed to acknowledge as much by agreeing to use Clearnet in Amsterdam. She also appears close to signing a deal to use LCH-Clearnet in London, despite her earlier objections to the merger. Théodore has sought to entice her by offering the LSE one of Euronext's four seats on the proposed 19-member board. Euronext also is close to selling a 7.6 percent stake in the merged entity to existing LCH holders, which will reduce its stake to 41.5 percent. (Its voting rights will be capped at 24.9 percent.) Giving LCH holders a stake in LCH-Clearnet is the best guarantee against future fee increases, contends Richard Berliand, head of futures and options at J.P. Morgan and a director of LCH. "The user community will be able to put pressure on for that not to happen," he says.

"They've worked very hard to try to satisfy us," concedes the LSE's Wheatley. The exchange is demanding further guarantees that LCH-Clearnet won't extend preferential terms to Euronext, and it has opened parallel negotiations with Deutsche Börse's Eurex Clearing arm. But many LSE users reject the idea of a German alternative, which would disrupt their existing clearing arrangements and offer little of the collateral savings that LCH-Clearnet promises by combining equities and derivatives. Wheatley grudgingly acknowledges the lack of alternatives, calling LCH-Clearnet "the flawed, last free woman at the dance."

The clearing merger has forced Wheatley to sharpen his offer to Dutch brokers by slashing the exchange's own fees. The LSE says that under proposals unveiled to the brokers last month, it will undercut Euronext by about 40 percent on average on trading fees. The LSE will charge E0.60 to E0.65 per transaction for a brokerage that does most of its trading in lots of about E20,000, according to Willem Meijer of SNS Securities, whose estimates are used by many Dutch brokers. Those charges, which include a 25 percent fee rebate that the LSE will kick back to sellers as an incentive to use its SETS system, beat Euronext and Deutsche Börse by a wide margin.

Euronext, which in July announced a new fee schedule for 2004 in an effort to fend off competition, will charge the same average broker about E1.15 to E1.30 per transaction, Meijer estimates. But Euronext varies its tariffs sharply according to volume, with big investment banks and proprietary traders paying less than E0.80 a trade while small, retail players can pay more than E2.00 a trade. Deutsche Börse's charges will average about E1.40 to E1.50 per transaction, Meijer estimates.

Deutsche Börse trades a handful of Dutch blue chips to support its equity options business. It says it already has 1 percent of the Amsterdam equity volume, with some 20 Dutch brokerages hooked up to its electronic trading platform, Xetra. This month the German exchange will expand its capacity to cover all 25 stocks in Amsterdam's AEX index. It hopes to lure brokers by offering free Xetra connections for the first year and kicking 70 percent of net fee revenues back to users over the first two years.

Deutsche Börse is being deliberately low-key about its ambitions and hasn't set a market share target. "I don't suspect this will be a very fast start," says Rainer Reiss, the exchange's director of development. "It takes time to move liquidity." Some bankers say this modesty reflects a niche strategy of trying to cherry-pick Dutch blue chips and enable firms to hedge their positions in equity derivatives on Eurex, Deutsche Börse's prime asset. Deutsche Börse's Seifert "is not interested in offering a business solution to the Dutch market," contends one London investment banker who has been closely involved in discussions with the exchanges. "He wants to destroy the Dutch market by splitting it."

By contrast, Furse is taking aim at the broader Dutch market by offering to trade both blue chips and Dutch midcaps on London's SETS electronic order book. The LSE's Wheatley has courted smaller Dutch brokers for months in an effort to capitalize on their dissatisfaction with Euronext. He also believes that London-based fund managers, who have boosted their share of Dutch trading to as much as 45 percent today from 30 percent a few years ago, are keen to see genuine competition among exchanges and are more naturally inclined to deal with the LSE.

But if London takes its market to Amsterdam, will the traders follow? The conventional wisdom says that's unlikely. Liquidity so far has proved to be stubbornly sticky. Traders stay at the exchange with the greatest volume in a given stock because market impact can easily outweigh trading fees. The hope of many Dutch traders is that the LSE and Deutsche Börse succeed in driving down Euronext's fees but don't take any volume away.

"I don't hope people will move business to other exchanges," concedes SNS Securities' Meijer, who has worked with the LSE on its proposal. "You'd have two or three liquidity pools, which wouldn't be to the advantage of the market. I don't mind having Royal Dutch in Amsterdam and Total Fina in Paris. I do mind having a piece of Royal Dutch in Amsterdam, a piece of it in London, a piece of it in Paris and a piece of it in Frankfurt."

The LSE's Wheatley asserts that technology will erode the stickiness argument by enabling traders to seamlessly access liquidity in different markets from a single screen. The electronic exchanges have proven that in the U.S. by taking market share away from Nasdaq, he notes. The biggest obstacle holding back that development in Europe is the fragmentation of clearing and settlement arrangements, he says. The LCH-Clearnet merger, for all the worries about its structure, will punch a big hole in that obstacle, he says.

Many bankers would be only too happy if Wheatley were proved right. "We need another exchange to win some market share in Amsterdam," says Niki Beattie, head of market structure at Merrill Lynch & Co. "We have to have fragmentation before we get consolidation."

But the odds against the LSE's Dutch gamble remain daunting. The disappointing experience of European competitors like virt-X suggests that the LSE will have to wrest large volumes away from Euronext, and do it fast, in order to succeed. "Unless you get between a third and a half of the market, you're not going to get to a sustainable position," says Wheatley. "If you don't do it quickly, you're not credible."

The same could be said of Clara Furse.