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2012 Top International Operations Executives

The More Things Change, The More They Stand Out
 |  DIANA CHAN: Shaking Things Up, In European Clearing |  CHRIS REMONDI: Increasing Information, Reducing Risk |  NEERAJ SAHAI: Marrying Large-Scale Technology With Boutique Service |  KEVIN MILNE: Making an Exchange Succeed By Working With Rivals |  THOMAS ZEEB: Gold Standard in Securities Processing |  CHRISTOPHER JAYNES: Cutting Out the Custodian Bank |  PATRICK COLLE: Going Global, But Not Everywhere |  TONY FREEMAN: Targeting Two-Day Settlement

KEVIN MILNE: Making an Exchange Succeed By Working With Rivals

December 14, 2011
By Chris Kentouris

Post-trade technology is essential to the effective operation of financial firms.

That’s how the London Stock Exchange Group (LSEG) starts off a recent white paper entitled: Post-Trade Technology: Reactive or Progressive. Its conclusion: the LSE is progressive and neutral, when it comes to handling complex change.

Kevin Milne, Director of Post-Trade Services, London Stock Exchange Group

The LSE has to be progressive about competing with the proliferation of new alternative high-speed trading platforms. And neutral, when it comes to clearing not just trades executed on the LSE, but those taking place on competing venues as well.

The most viable rival is BATS Chi-X Europe, formed in the last month by the takeover of Chi-X Europe by BATS Global Markets. The combination of the BATS Europe and Chi-X Europe operations created a pan-European trading platform that now handles about forty percent and 26 percent of all U.K. and continental European equities trading respectively. The LSE now attracts about 47 percent of UK trading volume.

“I have been given the opportunity by the LSEG’s chief executive to promote change through organic and inorganic means,” says Kevin Milne, director of post-trade services who was selected for the role by the LSE’s chief executive Xavier Rolet two years ago.

Tapping Milne, who had been in retirement, marks a turning point for the LSEG whose track record in post-trade operations hasn’t always been stellar. The exchange abandoned a post-trade processing project called Taurus in 1993 and sold a confirmation platform called Sequal to Thomson Financial in 1997.

The LSEG appears to have turned the corner with its takeover of Borsa Italiana in 2007, inheriting securities depository Monte Titoli and clearing house Cassa di Compensazione e Garanzia in the process.

Still, there are plenty of challenges. CC&G was credited with helping to boost the exchange’s recent bottom line, yet securities analysts are skeptical whether the clearinghouse can repeat its stellar performance under better economic conditions. Its rivals LCH.Clearnet, EMCF, EuroCCP, are SIX-Clear have been quick to cut fees to gain market share.

Also uncertain is how well the LSEG can adapt Monte Titoli to accommodate the European Central Bank’s new proposed Target2Securities (T2S) platform, which aims to consolidate the settlement functions of euro-zone depositories onto a single operating system. Milne has publicly supported T2S, but Monte Titoli, like other European depositories. faces the prospect of having to expand its reach in other services – beyond basic settlement. That expansion might be lucrative – but costly to implement.