UK, Chief quits Betfair’s LMAX months after retail launch

April 4, 2011Andy No Comments »

The CEO of Betfair’s financial trading exchange LMAX has left the company – only three months after the trading platform launched a CFD exchange product for retail investors.

The boss of the London Multi-Asset Exchange, Robin Osmond, a former bankers with JP Morgan, HSBC and Morgan Stanley, resigned from the financial trading platform he helped launch ‘to pursue other opportunities in the City’, according to a company’s spokesman. Osmond had been at the helm of LMAX for three years, overseeing its launch in October 2010.

Betfair, which owns a majority 75% stake in the LMAX business after injecting £25m in the start-up, said it remained ‘fully committed to the LMAX project’. Goldman Sachs also has a 12.5% stake in the venture.

The concept of LMAX is to match private traders and investors who want to trade CFDs in stock market indexes, fixed income products, commodities and foreign exchange trading products. When it floated last year Betfair put forward LMAX’s growth prospects, amid hopes that the business could revolutionise the contracts for differences market in the same way the Betfair exchange had transformed traditional sports betting markets.

But the departure of Osmond so soon after the platform was launched for retail investors doesn’t augur well for the start-up. Some critics claim the venture appears to be struggling to take off as it presently only offers a limited number of products and market makers are allegedly contributing much of the liquidity. Any peer-to-peer execution service relies on achieving critical mass since such a system depends on its users dealing with one another.

Betfair’s Chief Executive Officer David Yu stated there will be an official update on LMAX’s progress in June, when Betfair announces its full-year results.

Goldman Sachs is also understood to have been looking at re-organising the company, which in a similar way to Betfair connects parties with one another and earns commissions on their trades as opposed to taking positions against them.

Rivals like IG Group (which operates IG Markets) have claimed that LMAX doesn’t constitute increased competition to their main markets and that regulatory and liquidity restrictions made it ‘increasingly unlikely’ for new market entrants to succeed.

David Mercer will take over Osmond’s role, who has now taken the post of interim CEO with immediate effect. Most recently, Mercer worked at specialist foreign exchange and derivatives provider Velocity Trade and has spent 20 years working at financial services companies, including Saxo Bank, City Index and IFX Markets.

Comments: Mercer appears to have more commercial experience than Osmond but with Betfair shares trading at under a tenner £10 (which is way below the £15.50 IPO price when the shares floated in October 2010), Osmond’s sudden departure is likely to raise questions about the potential of LMAX among some in the City. On better news the London Multi-Asset Exchange today announced the launch of a smartphone trading application for the iPhone and BlackBerry mobile devices.

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