Nikhil Rathi grew up in Barrow-in-Furness, an isolated town at the tip of the 33-mile Furness Peninsula in Cumbria, north-west England. After reading Philosophy, Politics and Economics at St Anne’s College, Oxford, Nikhil graduated in 2000, completed a master’s degree in 2002, and joined the Civil Service. Although he was based at the Treasury, he spent three years in 10 Downing Street from 2005, serving as private secretary to Tony Blair and then Gordon Brown. In 2008, he moved back to the Treasury to lead the Financial Stability Unit, which was set up to oversee the government’s interventions to steady the financial system during those first turbulent years of the crisis. Later, he became director of the Treasury’s Financial Services Group, representing the UK government’s financial services interests in the EU and across the world, and dealing with the swathe of regulatory reform that the crisis unleashed.
He describes dealing with the crisis as the most intense professional experience he has ever had. He learnt a huge amount about the markets, public policy, the law and the way those areas intersected. More importantly, it opened his eyes to the interconnectivity between the City and the European and global financial systems.
He also learnt about leadership, endurance and managing in times of extraordinary uncertainty. “In a lot of these roles, you always have to have a degree of sensible optimism,” he says. “However bad it might seem at the time, if you’re measured about it, you can get through it.”
A change of scene
When he was ready for a change after 11 years working at the heart of government, Nikhil wanted to see what he could achieve in a business environment, and it was the capital markets world that fascinated him the most. He joined London Stock Exchange Group (LSEG) in 2014 as head of international development and chief of staff to then LSEG CEO Xavier Rolet. In 2015, he was appointed CEO of London Stock Exchange, the UK business that includes the listing business and UK exchange as well as others.
Nikhil is excited about what lies on the horizon: a shift towards new markets; the potential of technological disruption; and opportunities uncovered by major changes in the regulatory landscape over the past decade or so. “All of those things provide fantastic opportunities for us because we have a global orientation with very strong products and a strong partnership approach with our customers,” he says.
One new market Nikhil is particularly keen to pivot towards is China. It is on track to be the largest economy in the world, with the fastest growing capital market and asset management sector, and a long line of companies queuing up to go global. He wants to position London Stock Exchange as the international capital markets partner of choice for China.
The exchange has already been working on a number of ‘firsts’ with Beijing to make that a reality. The Shanghai–London Stock Connect, the launch of which is due to be announced soon, will allow investors on the London and Shanghai stock exchanges to more easily access each other’s markets. London is now the largest offshore renminbi (RMB) centre outside Greater China and, in 2016, it hosted the first offshore sovereign bond from China in RMB and the first Chinese international green bond.
Nikhil also sees opportunities for LSEG in China’s Belt and Road Initiative (BRI), which seeks to generate economic development by connecting trade routes between Asia, Africa and Central and Eastern Europe through infrastructure development. Chinese banks have already raised capital on London markets to fund construction projects along the BRI, and BRI companies listed on the exchange account for more than US$1tn of market capitalisation combined.
What does he say to those who are more apprehensive about welcoming China with such open arms? The increasingly tense US–China trade war launched by the Trump administration is based on claims that China is hurting the US economy through counterfeit goods, pirated software and theft of trade secrets. China, in turn, has experienced economic slowdown because of trade tariffs imposed by the US. EU officials are said to be considering proposals that would see Chinese telecoms companies excluded from bidding for 5G mobile network contracts across Europe for fear that Beijing could ask these companies to build ‘back doors’ into the technology to allow for espionage. Claims and concerns seem fanciful, but they exist nonetheless.
For Nikhil, not engaging with China is not an option. Its banks now represent four of the top ten banks in the world by balance sheet and its companies have an increasingly international presence. At some point, it will be a major global capital market. “I think it is important for everyone to invest the time and effort in relationships to understand how different markets around the world operate and how they are evolving,” he says. “The focus should be on how we can build mutually beneficial partnerships with China, which serve the interests of our people, customers and investors.”
One geopolitical issue where China is in the spotlight for all the right reasons is climate change. It prioritised green finance during its recent presidency of the G20 and, as mentioned earlier, issued its first green bond on the London market.
Nikhil believes China’s interest in green finance is a big factor driving a shift in attitudes towards this issue across the financial services sector. Others include Bank of England governor Mark Carney’s recent labelling of climate change as a global systemic financial risk, and a growing trend for sustainability to be considered in mandates from global institutional investors. Nikhil says that, by the end of 2018, US$30tn of assets under management across the world had a sustainability component to their mandates.
“There’s always more that can be done, and more that can be done more quickly, but those factors and the range of participants buying into this agenda would suggest the financial services sector is going to play a very significant role in driving decarbonisation of the economy globally over the next decade or so,” he predicts.
That it is China, and not just western countries, taking a lead in green finance is interesting, Nikhil acknowledges. It is a sign, he says, of how the global system of regulation and standard setting – and the players in that system – are changing.
Embracing change is what will help London Stock Exchange retain its leadership position in the capital markets. Beyond building new relationships with new markets, Nikhil has his eye on technology and the listings pipeline as areas of development.
He believes embracing technological disruption will help the exchange to remain resilient. London Stock Exchange is currently exploring how to use artificial intelligence and machine learning to improve market surveillance and monitoring. It is also looking at how blockchain can be used to improve efficiency, offer new services and scale those services globally.
LSEG will also continue to nurture its listings “stars of the future”, as Rathi describes them, through its ELITE initiative
. Via ELITE, LSEG works with investors, advisers and corporate partners around the world to help high-growth private companies to scale up. The programme is currently helping more than 1,000 start-ups in 300 countries.
The full version of this article was originally published in the Q1 2019 print edition of The Review. All members, excluding student members, are eligible to receive the quarterly print edition of the magazine. Members can opt in to receive the print edition by logging in to MyCISI, clicking on My account, then clicking the Communications tab and selecting ‘Yes’.
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