LONDON – Xavier Rolet is firmly rooted in London and wants to keep it that way, but that does not mean his eyes aren’t looking abroad.
Mr. Rolet, the chief executive of the London Stock Exchange Group and a former investment banker, is a familiar traveler on the London to New York route. He makes four trips a year to New York and Washington to meet with the exchange’s regulators, which include the Securities and Exchange Commission and the Commodity Futures Trading Commission, and its clients, among them big banks like Goldman Sachs and Credit Suisse, both institutions where Mr. Rolet once worked.
But in recent months, Mr. Rolet’s trips to the United States have taken him farther west, to an unlikely spot for a chief executive of a stock exchange on the other side of the Atlantic. He has been traveling to Seattle, the headquarters of the Frank Russell Company, which the exchange agreed to buy in June for $2.7 billion in cash from its majority owner, Northwestern Mutual. Frank Russell is the owner of the Russell 2000 stock market index, which measures the performance of small-capitalization stocks, and the operator of an asset-management business with about $275.1 billion under its wing.
The Russell purchase is an important milestone in the history of the 213-year-old London Stock Exchange. Before Mr. Rolet arrived in 2009, the exchange commanded headlines more as a takeover target than an aggressive acquirer. It spent much of its time fending off bids from rival exchanges, including Germany’s Deutsche Börse and Nasdaq, which in 2007 sought to buy the London exchange for 2.7 billion pounds, or about $5.3 billion. Today, the exchange, with a market value of £7.8 billion, is worth more than twice the Nasdaq offer.
That can be attributed largely to the course steered by Mr. Rolet, a Frenchman by birth but an Anglo-Saxon in style and sentiment. He takes tea over coffee and is open about his preference for the free-market economic course espoused by the United States and Britain over the high-tax, low-growth policies of his native France.
Mr. Rolet, 55, has no plans to step down anytime soon, but when pressed about the legacy he would like to leave to a successor, he is unequivocal on the issue of location: a company that “continues to be headquartered in London.”
In the fall of 2009, soon after Mr. Rolet took up office in Paternoster Square, where the exchange is based, he laid out three pillars of growth. In addition to expanding the traditional focus of an exchange — raising capital by the listing and trading of stock and other asset classes — Mr. Rolet wanted the exchange to push more aggressively into intellectual property, which includes the data, analytical tools and indexes businesses. He also sought to propel the exchange more boldly into balance sheet and risk management, which is essentially the plumbing of capital markets, the dull but lucrative business of settling and clearing securities.
“We were behind the rest of the industry,” Mr. Rolet said, picking over his breakfast of fruit and cereal in a contemporary dining room overlooking a historic London landmark, the Baroque-domed St. Paul’s Cathedral. “Other industry leaders were making decisions 15 years ago about derivatives and clearing that we missed out on.”
Mr. Rolet did not say so, but he was alluding to the exchange’s failure before his time to acquire the London International Financial Futures and Options Exchange, which would have given the exchange a futures engine like the Chicago Mercantile Exchange.
“We had to acquire the bits of the toolbox we didn’t have,” Mr. Rolet said.
Since taking the helm of the London exchange company in May 2009 after almost a decade at Lehman Brothers, Mr. Rolet has been transforming it from a marketplace focused on trading cash equities into a diversified infrastructure company. Over the last five years, he has been on a shopping spree, executing 13 acquisitions, including Russell, for a total price of at least $4.4 billion. He has had one serious setback: In 2011, a planned union between the London Stock Exchange and the Toronto Stock Exchange had to be abandoned a day before a vote by Canadian shareholders. The deal ignited a nationalist furor in the country, with some calling it a takeover of Canada by Britain.
Still, Mr. Rolet has succeeded in plugging some holes. The acquisition of a 50 percent stake in FTSE International for $450 million in December 2011 pushed the exchange deeper into the index business, and his move to buy a majority stake in LCH.Clearnet in March 2013 for $697.9 million has given the exchange a commanding position in interest rate swaps. LCH.Clearnet clears more than 90 percent of global interest rate swaps.
Growing and fortifying the exchange has been lucrative for Mr. Rolet. In the 2014 fiscal year, he took home a total pay package of more than £2 million, an 8 percent rise from the previous year.
But Mr. Rolet’s biggest test, integrating the Russell acquisition, lies ahead. Russell is not only thousands of miles from the exchange’s home turf, but the purchase was also ambitious in size. It required the London exchange to raise £938 million to finance it.
With the acquisition of Russell, which was completed last week, the London Stock Exchange Group will derive nearly a third of its revenue from the United States, up from the current 14 percent. The United States will actually eclipse Britain and Europe as a revenue source for the exchange. It remains to be seen whether Mr. Rolet will keep Russell’s asset management business.
America’s prominence in the exchange’s portfolio of businesses fits in with Mr. Rolet’s worldview. He is more bullish on the United States than he is on China, the darling of investors, whose growth rate he thinks will move closer to that of the United States.
“The U.S., in my humble opinion, is going to save the world, once again,” he said. “Some think it is not the superpower it once was, but no other single country is going to rival the U.S.”
Mr. Rolet’s affection for America can be traced to his childhood. He was born in 1959 in Algeria to parents who served in the French military. When Mr. Rolet was 5 years old, his family moved to Sarcelles, a gritty Paris suburb. Growing up, Mr. Rolet remembers yearning to leave France and head to the United States. “There were very few opportunities in my country if you were not born into the establishment,” he recalled.
Cobbling together loans, money he earned through jobs — selling mortgages for summer homes on the Mediterranean coast for four years — and working part time as an interpreter in the United States, he paid for a master’s in business at Columbia University. After graduating, he landed a job at Goldman Sachs trading international stocks under the aegis of a fast-rising executive, Robert E. Rubin.
Today, Mr. Rolet and his wife, Nicole, an Italian-American banker whom he met through common friends in the early 1980s, live in the Pimlico section of London. Since joining the London exchange, Mr. Rolet has had to give up on a passion: competing in the high-endurance Paris-Dakar rally, where cars and motorcycles battle through the Sahara on their way from France to Senegal.
Mr. Rolet has participated in three meets, the last one in 2009. After joining the London exchange, the board suggested he find a new adventure, regarding the Paris-Dakar rally as simply too dangerous for a “key man” like Mr. Rolet.
When he has time, he continues to pursue his interests in beekeeping and wine. The family vineyard, now managed by his wife, had a good but small harvest this year. “It happens,” he said, unbothered by the vagaries of the wine business. Someday, when he has done everything he can to ensure the exchange remains in London, he looks forward to getting a draft horse and tilling the land.
“I always wanted to work the soil, having grown up in concrete blocks all my youth,” he said.