Decisive: David Schwimmer says London has been quick to act over war
As a former Goldman Sachs banker in Moscow, David Schwimmer ought to be the right person in the right job as chief executive of the London Stock Exchange Group.
The combative American – not to be confused with his more famous namesake who plays Ross in Friends – sharply rejects any suggestion that the LSEG, home to more than 40 listed Russian companies, was slow off the mark when it came to suspending trading in their shares or expelling them from the main London indexes.
‘I think that perception is wrong,’ Schwimmer tells me as he jolts around in the back of a taxi on a post-Covid business trip to New York.
‘We have implemented the changes very quickly and worked very closely with the [UK] regulators and Government,’ he says.
A vocal advocate of the LSEG’s role as a pillar of the City, he contrasts the speed of reaction of London and his markets with what has been happening in his native US. ‘It’s probably worth taking a bit of perspective on this. When the US implemented its sanctions on February 24 and 25, it gave the markets until May 25 to get out of these securities…so three months.
‘My point is that we and the markets moved very quickly to suspend trading on the London Stock Exchange, to remove the security from the index data.’
The war on Ukraine, the risk to global financial stability and making the financial sanctions against Russia bite are top of the Stock Exchange boss’s agenda at present.
But since taking over from his controversial predecessor Xavier Rolet in 2018, he has been laser focused on building the LSEG into a world-leading trading and information presence. The depth and breadth of the LSEG has been transformed by the £20billion acquisition of Refinitiv – the trading and data group carved out of Reuters Thomson.
It may prove to be the ultimate defensive wall against the array of bidders from the US, Germany and even Scandinavia which over the years have been repelled by his predecessors.
A Harvard-educated Anglophile who makes no secret of his preference of London to New York, Schwimmer, 53, is a powerful advocate of retaining derivatives trading and settlement in the Square Mile post-Brexit.
He is working closely with government in an effort to restore the listing of Cambridge-based tech champion Arm Holdings to the London market where it belongs – tempting it away from New York. He regards much of the comment about New York’s Nasdaq being better for IPOs than the London exchange as ‘silly.’ For the moment, Schwimmer’s eyes are focused on the conflagration in Ukraine. Putin’s brutal war has underlined the value of LSEG-owned World-Check – one of the little noticed enterprises which came as part of the Refinitiv deal.
‘The financial markets are relying very heavily to comply with sanctions on our World-Check content. Institutions all over the world are using it to show that they are not dealing with sanctioned individuals,’ Schwimmer says.
World-Check is regarded as the leading database used by banks, companies and NGOs for background checks when bringing aboard new customers and making sure they comply with anti-money laundering, ‘know your customer’ and sanctions rules.
Will the sanctions work in taming the Russian bear?
‘The sanctions regime put in place has been far more effective and more aggressive than we have seen in the past and I would speculate more aggressive than the Russian government expected,’ argues the LSEG boss.
‘It is very effective in creating economic stress within Russia and sending a clear message that Russia will not be participating in the global economy as a result of this behaviour.’
Schwimmer broadly believes the global financial system is better able to absorb the shock caused by sanctions than it was in the autumn of 2008, when a US government decision to allow the investment bank Lehman Brothers to go into Chapter 11 bankruptcy triggered a financial catastrophe.
‘We actually had a default by VTB Capital on the London Clearing House (part of LSEG) as a result of sanctions. But everything worked and the collateral we had from the defaulting banks covered positions.’
The financial system may not yet have crumbled as it did after Lehman. But you never know where weakness will show up.
‘You have to be cautious whenever there is fragility and disruption as we are seeing right now because there may be some weaknesses in the system or some unintended consequences we are not yet aware of,’ Schwimmer warns.
Looking across the global landscape Schwimmer is less than sanguine even though he claims not to be in the ‘prediction business’. He sees risks coming from the war in Ukraine, surging commodity prices and in the background he points to Covid and the impact that is having on Chinese equities.
‘There are a number of risks and more pressures on the market than on economic activity.’
When it comes to tech flotations the shaven-headed, pugnacious stock exchange boss fiercely rejects the view – put about by former BT boss Gavin Patterson, The Hut Group’s beleaguered founder Matt Moulding and others – that London is not the right place.
‘We have a healthy market in London and we also have a very strong environment for private equity capital.
‘London continues to be a very, very robust and successful financial centre,’ the American insists.
He challenges the fashionable notion that New York and the Nasdaq market in particular would be the best place to float Arm Holdings. So far, that appears to be the route advocated by billionaire Masayoshi Son, the founder of Arm’s owner SoftBank.
‘I think the narrative about tech always having an easy run and spectacular performance in New York is a bit silly. The performance of, for example, the biotech sector in New York has been abysmal,’ Schwimmer adds.
He also thinks it is important that a company like Arm, which has its HQ in the UK and where its business mainly operates, should be in London if it wants to be in the key indexes.
Schwimmer discloses he is working closely with government to make sure London remains competitive and – in more normal market conditions – attracts big companies to the City.
The Ukraine-Russia conflict may also be a turning point for ESG investing, he says. In the last couple of years investors have taken the view that if they pull cash out of fossil fuel companies, ‘they have ticked the ESG box’.
Given the hostile geopolitical climate, in his view as steward as one of the world’s largest markets for natural resources, ESG ‘is not an appropriately sophisticated way to think about the challenges’.
As the architect of one Britain’s largest and most ambitious takeovers of recent times – the reshoring of Refinitiv – Schwimmer ought to be a national hero. Instead, he faces the slings and arrows of investors with short-term vision.
The Ukraine crisis, volatility and the trading profits it has landed have made his deal look smarter for investors in the LSEG – and polished the Square Mile’s appeal as Europe’s financial hub.
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