Fidelity U.K. Dumps LSE Stake

The U.K.-based arm of Fidelity International has sold its 10%-stake in the London Stock Exchange, according to Reuters.

Fidelity, which has been reducing its majority stake in the LSE for some time now, sold the remaining holding just last week, despite white-hot rumors of a sale. Sources anticipate a merger with Euronext soon and say negotiations are already under way. A merger would seem to greatly benefit LSE shareholders.

NYSE has also been an LSE suitor, as exchanges are under pressure to merge in an effort to increase volumes, lower trading costs and attract more companies to their lists. 

Other suitors are the German bank Deutsche Boerse, Australian banker Macquarie and the Nasdaq.

"Everyone thinks that the LSE won't be the LSE in six months to a year's time," said a dealer. "So the question is: will it be part of Euronext or some other exchange."

Industry watchers presume that the LSE is a good place for companies to list their shares, since the U.S. has the Sarbanes-Oxley Act, which has proved a compliance headache. That fact makes Fidelity's move even more puzzling.

"There has always been a presumption that as equity distribution platforms globalize, they would consolidate around one or two key platforms and there had always been a presumption that that would be in New York," Brian Magnus, co-head of U.K. Investing and Banking at Morgan Stanley said. "I think Sarbanes-Oxley has made the world think that actually that's not right, that actually it's more likely to be London.