The Stock Exchange needs new leadership - and fast

The notion that the London Stock Exchange might be about to be taken over by a medium-sized Swedish software company would, a few years ago, have been a laughable proposition. True, the OM Gruppen company's audacious bid for control of London has only a slim chance of success, but, since the collapse of the Stock Exchange's proposed merger with the Frankfurt-based Deutsche Börse earlier this week, London is definitely "in play", as they say in the City. Potential predators, such as the Paris Bourse, the US Nasdaq exchange and, of course, those Germans again, have been mooted and will no doubt be discussed in the margins of today's annual general meeting of the Exchange.

The notion that the London Stock Exchange might be about to be taken over by a medium-sized Swedish software company would, a few years ago, have been a laughable proposition. True, the OM Gruppen company's audacious bid for control of London has only a slim chance of success, but, since the collapse of the Stock Exchange's proposed merger with the Frankfurt-based Deutsche Börse earlier this week, London is definitely "in play", as they say in the City. Potential predators, such as the Paris Bourse, the US Nasdaq exchange and, of course, those Germans again, have been mooted and will no doubt be discussed in the margins of today's annual general meeting of the Exchange.

Whatever happens, it seems highly likely that London will eventually lose its independence. That fate is almost certainly deserved, as the recent history of the Exchange has been characterised by all manner of technical and managerial failures, which have damaged its ability to perform its primary role - to provide a reliable, efficient and low-cost place to conduct the business of buying and selling shares. Its reputation has suffered accordingly. At one stage a few years ago, this symbol of British capitalism even underwent a sort of semi-nationalisation, when it had to ask the Bank of England to rescue its computer systems. More recently, the Exchange failed to provide a way to accommodate properly two new groups of customers: new-economy companies that wanted to raise money by issuing shares, and a new breed of investors who wanted to buy these high-risk but potentially highly lucrative equities. It was a market that was soon catered for by the Nasdaq in New York and by the Neuer Markt in Frankfurt, but ignored by London until almost too late.

So what next? The answer lies in how London bridges the gap between the age of local exchanges, which is not yet over, and the new era of globalisation, which is proceeding but is not yet complete. Given the timing of those trends, perhaps the best solution would be for the London Stock Exchange to go it alone in the short term while continuing to explore sensible and workable solutions for integrating its activities with other, especially European, markets in the longer term.

Don Cruickshank and Gavin Casey, chairman and chief executive of the Exchange respectively, should go. London needs fresh leadership. Where that comes from - London, New York, Stockholm or Frankfurt - is ultimately less important than the maintenance of a global-class market.