Rolet wages war on LSE's newer rivals

LONDON Stock Exchange chief executive Xavier Rolet yesterday waged his own form of price war on the upstart rivals clawing away the group&rsquo;s market share, claiming their business models are economically unviable at current pricing levels.<br /><br />Rolet&rsquo;s remarks came as the LSE posted a 37.5 per cent drop in first-half pre-tax profit to &pound;79.4m, hit by the market turmoil and aggressive pricing from new exchanges such as Chi-X, BATS and Nasdaq OMX Europe.<br /><br />&ldquo;None of the MTFs can succeed in building their platforms with their current pricing levels,&rdquo; Rolet said. &ldquo;They are too low and structurally unprofitable.&rdquo; He emphasised the need for new sources of revenue through innovation and investment in technology.<br /><br />But his remarks caused a storm among rivals, who claim they can sustain their ultra-competitive prices well into the future.<br /><br />Mark Howarth, interim chief executive of Chi-X, said: &ldquo;The notion that our business model is unviable is entirely false. Chi-X has a very strong balance sheet and a strong pipeline of extra revenue lines at differing rates of profitability, all building on super-efficient technology investment &ndash; our prices are absolutely sustainable.&rdquo;<br /><br />BATS Europe chief executive Mark Hemsley insisted his firm is capable of reaching profitability by gaining market share. &ldquo;We also have the capability to provide more sophisticated products at the same competitive prices,&rdquo; he said. &ldquo;We operate at a much lower cost base than the LSE so can sustain a lower level of pricing.&rdquo;<br /><br />Rolet said the LSE&rsquo;s future market share would depend on cutting costs and rolling out new technology quickly, as well as on the future shape of the post-trade space. <br /><br />LSE first-half revenue fell nine per cent to &pound;310.9m, including the cost of its $30m (&pound;18m) acquisition of technology provider MilleniumIT.