Blockchain Superstar

Masters of the London Stock Exchange?

A high-profile CEO is probably the last thing the exchange wants, but it needs one.
Photographer: Simon Dawson/Bloomberg
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An aged British financial institution needs a new leader to make a fresh start and adapt to new technology. Faced with this brief, a headhunter always knows just where to start the shortlist -- Blythe Masters.

The controversial banker turned fintech entrepreneur is being touted as a successor to Xavier Rolet as CEO of the London Stock Exchange Group Plc. If the job were about grand visions and nothing else, she would sail through.

Masters is a big name in global finance. While at JPMorgan Chase & Co., she pioneered the development of credit-default swaps, contracts later blamed for super-charging the financial crisis.

Today, she is a fintech entrepreneur. Her company, Digital Asset Holdings, specializes in so-called distributed ledger technology, or blockchain -- a secure, shared database which originated with the cryptocurrency Bitcoin and is now being co-opted by financial firms.

Blockchain proponents claim it has the potential to cut costs, reduce errors and speed up trade settlement. Australia's ASX exchange, Citigroup Inc., Goldman Sachs Group Inc. and JPMorgan are among the backers of Masters' firm.

Broadening Out

Xavier Rolet helped to diversify the London Stock Exchange's sources of revenue

Revenue breakdown for the three months ended 9/30/2017

Source: Bloomberg

As for her candidacy for running the LSE, there's plenty on the positive side of the ledger. A company facing disruption needs a leader with the ability to anticipate the near future. That's what the LSE had in Rolet. A former investment banker, he had a feel for markets, and not just equities. He moved fast to diversify the LSE's business away from stock trading, expanding in index provision and hot growth areas like clearing.

Masters understands market plumbing, financial technology and regulated businesses. It's easy to see how she could replace Rolet as a CEO with an ambitious vision.

On one view of the LSE, that's all that counts. After Rolet's deal spree, the exchange is more like a federation of individual units, each with strong operational leadership. It could probably trundle along quite happily while the C-suite pondered the future of financial markets.

Rolet Rise

Shares of the London Stock Exchange soared under Xavier Rolet's tenure as CEO

Source: Bloomberg

The snag is that Rolet's successor probably has a job to do knitting together all his acquisitions. The new CEO may also need to get the LSE staff to pull in a new direction and think in different ways. It's less clear Masters' background is suited to that task. 

The other issue is her lack of experience a director of a public company in Britain. CEOs of U.K. companies are ultimately answerable to the board. That relationship came unstuck when LSE Chairman Donald Brydon tried to set a leaving date for Rolet as he approached a decade in the role.

Rolet was little-known when he took over at the LSE. Then he became a star. Then there was a crisis, the circumstances surrounding which are still murky. Masters starts off a star and would need to become part of a boardroom team, keeping on-side the talent she would inherit below her. Right now, she runs her own show.

Were it not for the damaging circumstances of Rolet's departure, her candidacy would surely be much stronger. That may also go for her appetite for the job.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

    To contact the author of this story:
    Chris Hughes in London at chughes89@bloomberg.net

    To contact the editor responsible for this story:
    Edward Evans at eevans3@bloomberg.net

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