Should the LSE find time for Dubai?

Clara Furse, the Chief Executive of the London Stock Exchange (LSE), paid a flying visit to the Gulf last week, along with Martin Graham, the LSE's head of equity markets. But she did not visit Dubai.

There is nothing wrong with that, I suppose. It is getting rather hot at this time of year, and if you're used to the temperate climate of London, you would probably chose to limit your business visit to the region to the absolute minimum, concentrating on the absolute essentials before heading back to European comfort. So Furse went to Qatar.

Again, that is not particularly surprising. Qatar, through its investment authority the QIA, has a 14 per cent shareholding in the LSE, and there are long-standing connections between London and Qatar in personnel and investment philosophy. So much so, in fact, that London is well down the road to clinching a deal with Qatar to take this relationship a stage further, into an area of mutual co-operation and joint venture that will make Qatar the LSE's chosen partner in the region. It is likely that the details of that relationship were on Furse's agenda when she met with QIA officials, which would also explain Graham's presence on the trip.

But there is another reason why the LSE should make a visit to the Gulf at this time. Shares in the LSE have been having a torrid time of it recently, the result of a three-way squeeze that has seen them fall by 30 per cent per cent in the past 12 months.

The exchange's valuation has suffered, as all financial businesses have, from the sub-prime and credit-crunch crises and the falls in equity markets that accompanied those difficulties. This is a factor outside the control of LSE executives.

Second, LSE is encountering some meaningful competition in its European hinterland, as a number of other organisations, like OMX of Sweden (now owned by Nasdaq, of which see more below) and US-backed Chi-X, have begun to offer low-cost trading arrangements in rivalry to LSE's product.

Finally, there was always going to be a reaction to the heady days of 2006-7, when bid speculation pushed up the LSE share price to unprecedented levels. Furse found herself under siege from German, Australian and American predators who wanted to take over the LSE. To her credit, she saw off the contenders and has now managed to engineer a much more stable share register than over the past few years.

Which is why she should have taken the opportunity to hop on the short flight from Qatar to Dubai, and paid some attention to perhaps the most crucial part of that share register. Qatar has 14 per cent, but there is a bigger investor among the LSE's shareholders – our very own Borse Dubai owns 20 per cent, it acquired as part of the complicated transactions last summer that ended with Nasdaq swapping its LSE shares for Dubai's interest in OMX and an alliance between the New York and Dubai exchanges.

There was some suspicion in London about why Dubai did this deal in the first place. The LSE had been lining up Qatar to take Nasdaq's stake, and was offended that Borse Dubai crashed the party. The alliance with Nasdaq put Dubai on the wrong side of the struggle for supremacy in global equities, from London's perspective. So Dubai was not "welcomed" onto the share register with the same warm enthusiasm that greeted Qatar.

Nonetheless, ever since this misunderstanding, Dubai has made all the right noises about its interest in LSE. It is a long-term holding, Dubai has consistently asserted, and it looks forward to a fruitful relationship with London. Dubai has behaved perfectly properly in this respect, after the clumsy confusion of the initial introduction.

So you might have expected LSE to have made time to visit Dubai, while it was in the region. People I spoke to at Borse Dubai were disappointed not to have had the chance to hear Furse's plans to restore the value of their investment in LSE, which has fallen substantially along with the value of the shares. The numbers are confused because of the complex nature of the transactions, but Borse Dubai's stake was worth somewhere in the region of £1 billion (Dh7.29bn) last August – now it is around half that.

Long term shareholders, such as Borse Dubai, can live with that, as long as they know their investment, and their interests, are being looked after. Dubai is entitled to just as much consideration as Qatar.

The next time Furse is in the region, she should see to it that Dubai is given that respect. Hell hath no fury like a shareholder spurned.

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