MSE SUPER DEAL BASED ON HOPES FOR A COMMODITIES SUPER-CYCLE

London Stock Exchange staff fed up with working in the Big Smoke are about to be offered the chance to spread their wings – and fly off to Mongolia.  Ulaanbaatar’s Mongolian Stock Exchange last week took a big step towards modernization with a deal with the London Stock Exchange under which a number of LSE staff will effectively run the Mongolian bourse for two or three years.
The deal is remarkable on three levels. First, Mongolia is hoping to use London as a gateway through which to source inward capital flows and investment as a counter-weight to growing Chinese and Russian involvement in Mongolia’s booming mineral and natural resources sectors.
Second, the British exchange is gambling that by getting involved it makes London the obvious destination for Mongolian mining and natural resources companies wanting to list abroad. Much of this is based on LSE CEO Mr. Xavier Rolet’s firm belief in the longevity of the commodities “super-cycle”.
Third, the LSE will not merely be providing technical assistance – what usually happens in these situations. The LSE will appoint a management team at the Mongolian exchange “to oversee its development and privatization”, according to a statement by the companies. One project is to implement an international-standard Mongolian market index.
The LSE’s Sri Lanka-based technology provider, Millennium IT, will provide trading, surveillance and post-trading infrastructure. A representative from the Mongolian Exchange will be based permanently at LSE headquarters in Britain too.
This is very deep involvement of a foreign exchange in the running of another country’s and is as unusual as it is creative.  But for both sides, whether this pans out as hoped will still depend on one thing: whether the super-cycle lasts.
Source: beyondbrics in The Financial Times
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