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London Stock Exchange boosted by mini-Budget chaos

london stock exchange
london stock exchange

Frantic trading during market turmoil sparked by the disastrous mini-Budget has boosted the London Stock Exchange Group.

The company on Friday said third quarter revenues had jumped to £1.9bn, up 16pc compared to a year ago.

It came after volatile markets in the wake of Liz Truss’s ill-fated tax cutting plan benefitted the owner of the London Clearing House, as investors rushed to convert assets into cash.

Markets were spooked by a string of surprise tax cuts, which left the Government’s spending plans partly unfunded.

This sent yields on long term gilts soaring and forced pension funds and other investors who had borrowed against the bonds to come up with more collateral in a hurry.

The chaos prompted cash collateral at the London Clearing House to reach an all-time high in September, LSE Group said, and drove treasury income 41pc higher.

David Schwimmer, LSE Group’s chief executive, said around one third of the company’s revenues come from trading and transactions, so it “tends to benefit from the volatility and uncertainty”.

He added that the company was making “good progress” on the return of surplus capital to shareholders.

The LSE Group in August announced the launch of a £750m share buyback. On Friday it said £235m was returned in the third quarter.

Chaos on the bond markets in the immediate aftermath of the mini-Budget triggered an intervention from the Bank of England days later, which launched a temporary bond-buying programme to help stabilise the market.

Andrew Bailey, the Bank’s governor, later said the move had been necessary to prevent a doom-loop that would have forced pension funds into forced “fire sales” of bonds.

Through so-called liability-driven funds, many retirement pots had used money borrowed off the back of long-term gilts to buy more gilts, and so on.

This meant that when a big rise in gilt yields caused prices to fall, the funds suddenly faced cash calls for further collateral from lenders.

It risked creating a feedback loop, as the resultant bond sales pushed prices ever lower.

Following the Bank’s initial intervention, which ended last Friday, some measures remain in place to help pension funds deal with sudden calls for collateral through borrowing.